Brazilian miner Vale plans to raise US$1bn to invest in logistics

Brazilian mining giant Vale plans to raise up to 6bn reais (US$1.06bn) through the issue of local bonds called incentive debentures to invest in logistic projects.

The company will issue three series of debentures for 3bn reais, 1.8bn reais and 1.2bn reais, maturing in 10, 12 and 15 years, respectively. Incentive debentures offer a tax exemption to investors who purchase them.

The proceeds will be used by Vale to build a section of the center-west integration freight railroad, known as FICO, and to construct a new road and rail bridge over the Tocantins river, the company said in a statement.

For the FICO project, the company is planning to use 2.2bn reais of the money raised via the bonds "to implement the 383km section of FICO connecting the municipalities of Mara Rosa, Alto Horizonte, Nova Iguaçu de Goiás, Santa Terezinha, Crixás, Nova Crixás and Aruanã in Goiás [state], in addition to the municipalities of Cocalinho, Nova Nazaré and Água Boa in Mato Grosso [state]."

According to Vale, the total investment estimated for the rail project is 8bn reais.

Meanwhile, the firm will spend another 3.8bn reais of the proceeds on the 2.3km bridge over the Tocantins river in the municipality of Marabá, Pará state. The total investment in the structure is estimated at 3.95bn reais. Vale said that the project has already advanced 43%.

With numerous mines spread across remote areas of Brazil, Vale is also is one of the largest logistics operators in Brazil. 

The company is currently in negotiations with the federal government to renew two railroad concession contracts: the Carajás railroad (EFC) and the Vitória-Minas railroad (EFVM).

The investments outlined in these logistic projects are part of the compensation agreement the company is negotiating with the government to renew its other contracts.    

For years, various governments have pressed Vale to invest more in logistics and in its domestic mining operations. The firm recently announced a new CEO, Gustavo Pimenta, who established that one of his priorities would be closer ties with the public sector and society.

Itaú BBA will be the lead coordinator of Vale's debenture issue and UBS-Banco do Brasil, XP Investimentos, Bradesco BBI, BTG Pactual and Banco Santander Brasil will also work on the operation.