According to a statement by Vale SA CEO Murilo Ferreira to news sources on Tuesday, Brazilian iron ore miner MMX should honor a contract to pay Brazil's MRS railway for iron ore shipments even if the mines are not ready to produce. Vale owns a 38 percent voting stake in MRS, plus a 42 percent stake in its total capital, making it MRS's largest shareholder.
MMX Mineração e Metálicos SA currently has a "take-or-pay" contract with the MRS Logística SA railway to ship 36 million metric tons of iron ore annually through 2026 at 26.46 reais ($12.03) per metric ton, from the MMX mines in Minas Gerais state to MMX's Sudeste Port near Rio de Janeiro. Additionally, the contract states that MMX must pay for at least 80 percent of the total contracted volume starting in 2017 whether the company ships the iron ore or not.
As MMX seeks to renegotiate the MRS contract and other accords with suppliers, Vale has taken the official position that the existing contract should not be altered.