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Vale, a platform for Mozambique’s development

Interview - July 17, 2013
Ricardo Saad, Vale’s Project Director for Africa, Asia and Australia, meets with Upper Reach to discuss the Brazilian mining company's plans for Mozambique, which include infrastructure development, new investments in mines and training programmes, and floating 10% of its shares on the local market
Given the recent findings of natural gas, and the reopening of exports for coal, Mozambique’s future has drastically changed in recent years and there’s a new horizon of opportunities. In the meantime, while the country reaches the desired output, the socioeconomic and legal fabric of the country is transiting a stage of preparation. What is your opinion on the path that Mozambique is following and what is the role of Vale in this new paradigm shift?

We see the mining sector, and Vale more specifically, as a platform for development. This is not only because of the direct benefit it brings, but mainly due to the union Vale has with infrastructure. Mining demands infrastructure (railroads, telecommunications, etc) and services needed to develop its activities. Mining, done in an inclusive way (like in the Nacala Corridor), goes beyond mining: it brings benefits that help integrate the necessities of the region.
We need to think about the impact of our activities at the regional level, at a SADC level (South African Development Community) and also at a community level. When we planned the Nacala Corridor and its links with the railroad from Malawi, integrated with the lines in Moatize, Tete, a regional development platform is developed and anchored by mining. We need to have a regulatory political-institutional environment that encourages and supports us. Mozambique has done its share, the government has supported us; not only Vale, but also the entire sector, the regulatory framework has adjusted appropriately (with public-private partnerships). The concession we have on the railroad and seaport is already regulated by this cooperation framework, in which we have invested nearly 60% from Vale, and 40% from CFM (Ports and Railroads of Mozambique).
In Mozambique we are working at the Nacala Corridor which has a total extension of 913kms, but we only take advantage of some 580kms of existent railroads. We will create a terminal at the Nacala port, at a point on the other side of the bay due to its deep waters, which is strategically located in the east coast of Africa with access to the Asian markets.
That corridor involves four concessionaries and therefore; it is an investment that will certainly bring many benefits, not only for Mozambique, but for the whole region. 
From the coal mining stand point, in spite of the distance from Nacala being greater than from Beira (nearly 300kms), the Nacala Port is much better for Vale; carrying larger ships leads to more competitive freight. 
We already invested nearly $2 billion at the Moatize mine and in the capacity of the Sena line. Investments until 2016 are projected to be more than $6 billion (in which $2 billion will be for the extension of the mine and $4.5 billion for the railway and port). That railroad has an inclusive character: it will serve to transport cargo as well as passengers.
At Vale, we have other projects to develop in partnership with other companies and there are other projects in the areas of agriculture and forestry to be carried out in Niassa and Nampula. It is a big opportunity for everybody to develop other activities and generate a positive balance in a unique development corridor.
When is it expected that the 22 million tons of coal exported will be reached?

Our goal is to attain the 22 million tons by 2017. We have already started the investment on the expansion of the mine and the conclusion of the project is aligned with the infrastructure. This synchronicity is the determinant for when we will be able to export the 22 million tons.
We will start the export of coal from the Nacala Corridor at the beginning of 2015 and in 2017 we will start to export 22 million tons (adding the quantities from Beira). Divided between those, we should maintain an operation of approximately 18 million tons in Nacala and 4 million tons in Beira. 
What is the strategy behind the offering of 10% of Vale’s shares to the local market?

This is a commitment we have with our mining concession. The government already possesses 5% of the shares through the “Empresa Mocambicana de Exploracao Mineira” (EMEM), and we are still going to place 10% for the local market. We expect this offer to be made in the most embracing way possible. For that we can use the stock market, funds, etc. The modelling is being done, and shortly we will launch that project.
With regards to social responsibility, we had the opportunity to visit the works done in Moatize, both 25 de Setembro and Cateme. Both projects had a large impact on the local community; however, it received much criticism. What evaluation do you have of this project?

I defend what we have done as a very positive initiative: we are adding value and improving the quality of life of the communities surrounding the mine; we could not be different, because these works are in line with our mission, which is very clear in relation to the respect towards people and the environment. In spite of the problems we had, which we never denied but always attempted to improve, the balance is very positive.
Recently, we received a report from Human Rights Watch (HRW), which alerts us on important issues; we have received it with much attention and humility to accept there are points on which we need to work on. When HRW came here in March of last year, we already had negotiated and met the demands of the population. With the leadership of the provincial government, we started a series of measures for the specific improvement in the case of Cateme, but independently of that and apart from Cateme and 25 de Setembro, we have a very close relation with all the population from Moatize, Tete and Mozambique.
Our concern is to educate the local youth: nearly 86% of our direct workers are Mozambicans, the young individuals we have recruited in Moatize are the operators of the largest equipment in all of Africa. This contributes, as well, toward gender equality: we have several women working as equipment operators of the mine. Recently, we hired young workers who will complete middle schooling, for them to be our future operators; the community is treated as part of our existence. 
In partnerships with local universities, we are training railway engineers, security and we will even launch a course on port engineering. Our activity demands a series of needs and we seek to invest in partnership with local institutions, so that other ports benefit from the economic activities that mining brings about, like the railway engineering course, in partnership with the CFM which allows other companies to benefit from that.
Our evaluation is very positive and always looks to improve. We know that the development process, like the one in Cateme, will not end when people are relocated: it is a permanent process.
With regards to environmental responsibility, what is Vale’s vision adapting its global environmental strategy to the Mozambican context?

The care we have, which is in our environmental management plan is that, as mines develop, the areas that were mined can already be recovered, so that in the future, when the mines are closed, we return to the communities an environment at least equal and (if possible) better that the one found, from the point of view of biodiversity, water and air quality.
We believe and have knowledge and proven experience of that (like for example in Amazonia, where we have an activity fairly evaluated) and we learned a lot from other parts of the world. We understand that mining must leave a legacy, not only for development but also leave a legacy of social responsibility for future generations. This means that we must leave an environment in which other activities and be carried on for future generations, which can substitute mining.
In spite of knowing that the Tete Basin has a production potential for many years, we have to think and be aware that mineral resources are finite and the role of the government, in this regard, is very important. We must work with the government in the planning of strategies to be applied in that region, in line with its aptitude of what can be done. The earnings of the mining activity must guarantee that future generations develop and keep the standards they have achieved.
Vale already has a long-term strategic programme for the closing of the mines, as we saw in Moatize. As one of the largest mining companies in the world, Vale has the power to change the image of mining companies by conducting good environmental practices. What does the company intend to do locally to materialise the good intentions?

The mining companies of the past do not have a very good image. But this past is even more distant; a lot has been learnt, and today, it is not admissible to start a mining activity without considering the closing activity of the mines, and that said closing, has been authorized and debated with society.
Many times, the communication is not as efficient as it should be, but today, it is unthinkable to consider mining without discussing it with the society, the stakeholders, the scientific community, etc. We have a slogan that reflects this thinking: there will not be a future without mining, and there will not be mining without thinking of the future.
I participated of the World Economic Forum in Africa and ended very satisfied to have seen that mining has been perceived not as a necessary bad, but rather as a pillar for development if properly managed. People need to look at mining as a sustainable activity; and mining is a sustainable activity with a big impact in the environment. It can be carried on in a way in which the result is positive and beneficial for the world.
As we spoke with former President Chissano and the Prime Minister, this time of changes is not only a matter of economic performance, but rather of pride and self-esteem that Mozambicans are recovering after many years of suffering. What is the contribution from Vale towards this new identity of Mozambique?

The level of investment we are making is very big. If we compare a country that has a GDP of $12 billion, to think that until 2016 we will invest $8 billion, is very significant.
If we count, when we achieve full production, the direct benefits by the payment of taxes and the dividends the country will have (because the country also participates in our operation) will be nearly $500 million a year – without taking into account all the chain of services contributed, which generates taxes and employability.
We have studies that show that for each direct job, around 10 indirect jobs are created in the chain of services related to the activities. With this, between the mine, railway and port, we are talking about nearly 10,000 direct jobs at the moment we enter full operation. This is a positive impact which involves more than 100,000 people.
The mining activity can contribute dramatically toward the country’s revenues, not only through the payment of taxes and fees, but also through currency, through exports, making it possible for countries to face their import needs.