The world’s top iron ore producer Vale (NYSE:VALE) is getting closer to inking a commodity streaming deal with Chinese companies that could afford the Brazilian giant an up to $9 billion upfront payment.
Bloomberg reported over the weekend a deal with China Investment Corp, the country’s $814 billion sovereign wealth fund, could see Vale sell part of its future iron ore output to the Chinese over 30 years:
According to the report citing people familiar with the matter other Chinese companies and Japanese trading houses have also held discussions with Vale and considered alternative agreements including acquiring a minority stake in the company’s iron ore assets:
“A so-called streaming transaction would allow CIC, owned by the government of the world’s biggest iron-ore importer, to profit from a recovery in commodity prices without bearing all the operational risk associated with owning mines. Vale, which has said it will consider the sale of $10 billion of its best assets by the end of next year, would get immediate cash while staying in charge of valuable assets.”
Hit by its first annual loss since 1997, the Rio de Janeiro-based company said in February it wants to reduce its net debt to $15 billion within 18 months and would look at selling core assets to do it.
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