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Vale agrees $2.5 billion sale of fertilizer business to Mosaic

Vale's Brucutu mine in Barao dos Cocais, Minas Gerais.
Dado Galdieri | Bloomberg | Getty Images
Vale's Brucutu mine in Barao dos Cocais, Minas Gerais.

Vale agreed to sell part of its fertilizer business to Mosaic, for $2.5 billion, in a move aimed at helping the world's largest iron ore producer cut debt and focus on core mining activities.

Vale will receive $1.25 billion in cash and $1.25 billion in newly issued shares of U.S.-based Mosaic, a roughly 11 percent stake in the firm, the Rio de Janeiro-based company said in a Monday securities filing.

After the deal closes by late 2017, Vale will have the right to pick two members of Mosaic's board, the filing said.

Reuters reported on Oct. 5 that the Brazilian miner was negotiating the sale with Mosaic.

According to the filing, Vale will retain control of its nitrogen and phosphate fertilizer assets in the city of Cubatão, in southeast Brazil but expects to sell them in 2017.

Mosaic will acquire the rest of Vale's phosphate assets in Brazil, Vale's stake in Peru's Bayóvar mine and Canada's Kronau potash project. Mosaic has yet to decide whether to include Rio Colorado potash project in Argentina in the acquisition.

Vale, the world's largest iron ore miner, is disposing of assets to help meet a $10 billion debt-reduction target by next year. The plan was devised by Chief Executive Murilo Ferreira to help protect the mining company against lower iron ore and nickel prices, after losing a record $12.1 billion last year.

Vale said it will use the funds raised with the sale to cut debt, while continuing its divestment program.

Preferred shares in Vale have advanced 140 percent so far this year to 24.33 reals, surpassing a 35 percent rally in Brazil's benchmark Bovespa stock index.