Vale writes down US$1.729 billion

The book value of the coal assets of the Brazilian mining giant Vale in Mozambique fell by 2.403 billion US dollars in 2015, leaving these assets valued at 1.729 billion dollars.According to a company statement released on Thursday, the impairment on the assets was due to lower coal prices and the increase in the costs of logistics last year. An impaired asset is defined as one the market value of which falls below its book value, and is not expected to recover.Vale also revealed that its EBITDA (earnings before interest, taxes, depreciation and amortisation) for its Mozambique operations was minus 508 million dollars in 2015. This compares with EBITA of minus 506 million dollars in 2014.Despite heavy losses, the company has continued to invest in Mozambique. In the last quarter of 2015 it spent a total of 196 million dollars on expanding its coal mine in Moatize, in the central province of Tete. It spent a further 259 million dollars on the Nacala Logistics Corridor, through which it will transport its coal by rail, through southern Malawi, to the new port of Nacala-a-Velha.The situation is reminiscent of the predicament that the London-based mining company Rio Tinto found itself in during 2013. Rio Tinto had to write down its Mozambican coal assets by three billion dollars. A year later it sold off the assets for the derisory sum of 50 million dollars to the Indian state owned conglomerate International Coal Ventures Private Limited (ICVL).