The financing negotiations for the Nacala corridor rail and port project in Mozambique and Malawi are likely to continue deep into next year, with the exact structure of the deal not yet determined, IJGlobal understands.

Mining company Vale, the sponsor of the roughly $4.5 billion project, had hoped to sign the financing in early 2016, though this now looks optimistic according to a source close to the deal. Vale has been funding construction, which is well advanced, on balance sheet up until now. This has been a particular burden on the company in recent times, given the negative impact on depressed commodity prices have had on its capital reserves.

Vale, like most major mining companies, traditionally raises money in capital markets to fund major projects. It is instead pursuing a project financing for Nacala, with HSBC acting as financial adviser.

The project entails the construction of a railway linking Vale’s Moatize coal mine in the Tete region with the export port of Nacala in the northeast of Mozambique. It will stretch for roughly 584km, travelling through landlocked Malawi, and will have the capacity to transport 18 million tonnes per year.    

Mitsui bought a 15% stake in the Moatize coal mine at the end of last year, and Japanese lenders are expected to play a big role in the financing. Alongside JBIC and Nexi, which will provide debt coverage for Japanese banks, development finance institutions (DFIs) the IFC and AfDB are also expected to lend on the deal.

Despite such heavyweight lender support, Vale is still to allocate tickets and is some way short of the meeting the total debt requirement. It will hope to bring other African DFIs into the deal before signing, with ECIC, for example, being lined up as a potential lender.