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Goldman Sachs has increased its bet on the natural resources sector with a deal to buy a coal miner in Colombia from Brazil’s Vale.
For Goldman, the $407m deal will reinforce its existing coal operation in Colombia while for the Brazilian miner the transaction will allow it to concentrate on its core metals business.
“The sale of the thermal coal operations in Colombia is part of our continuous efforts to optimize the asset portfolio,” Vale said.
The acquisition of the coal assets will strengthen Goldman’s physical commodities business after two transactions in 2010, when it bought another coal miner in Colombia as well as metals warehousing group Metro International.
Already one of the bigger banks active in coal trading, Goldman Sachs’ Colombian Natural Resources, the wholly owned unit that is buying Vale’s coal operations in the country, increased production 58 per cent last year.
Vale said it would sell 100 per cent of its El Hatillo coal mine and Cerro Largo coal deposit as well its Sociedad Portuaria Rio Córdoba coal port facility on Colombia’s Atlantic coast.
The company would also sell an 8.43 per cent equity stake in the Ferrocarriles del Norte de Colombia (Fenoco) railway that connects the coal mines to the port.
Aside from increasing its coal mining capacity, the deal will smooth the way for greater access to the port and railway for Colombian Natural Resources’ existing mines.
Vale paid $306m in 2008 for the mines, railway and port but under the leadership of Murilo Ferreira, its new chief executive, it is trying to renew its focus on core industries, such as iron ore.
“Active portfolio asset management is a very important tool to optimise capital allocation and focus management attention,” Vale said.
Barclays Capital said Mr Ferreira was implementing stricter project analysis standards and focusing more on returns given rising uncertainties over commodities demand and pricing.
“New management at Vale has been highly focused on capital discipline, since day one,” the bank said in a recent report.
Colombia is host to most of the major international thermal coal producers.
The country’s coal production increased 15.4 per cent last year to 85.8m tonnes, with exports up 16 per cent to 79.2m tonnes, Reuters reported.
The largest production increases were in the Cesar province where Vale and Goldman’s units operate as well as Glencore and Drummond International.
Production at Vale’s mines rose 19.4 per cent to 3.57m tonnes last year while at Colombian Natural Resources output was 2.39m tones, Reuters reported.