Brazilian mining giant Vale (NYSE: VALE) has agreed to sell its local aluminum operations to Norway’s Norsk Hydro ASA, the companies said in separate statements on Sunday.

According to Hydro, the deal is worth US$4.9bn.

Under the agreement, Vale will transfer the totality of its stakes in Brazilian aluminum company Albras, alumina refinery Alunorte and alumina plant project Companhia de Alumina do Pará (CAP) for US$405mn in cash and Hydro will assume a US$700mn net debt.

The Brazilian company will also receive new shares equivalent to a 22% stake in Hydro’s outstanding shares.

Vale will not be able to sell its stake in Hydro for two years after the conclusion of the transaction and will have the right to appoint one representative to Hydro’s board. Under the agreement, Vale cannot increase its stake in Hydro beyond 22%.

Also as part of the deal, Vale will create a new company called Bauxite JV and will transfer bauxite mine Paragominas and all its other Brazilian bauxite mineral rights to this new company.

After that, Vale will sell 60% of the JV to Hydro for US$600mn in cash. The remainder will be sold in two equal tranches in 2013 and 2015 for US$200mn each.

“Vale is very well positioned in the upstream of the aluminum business, with world-class bauxite and alumina assets. However, its participation in the primary aluminum metal industry is small, and has no growth potential due to the lack of access to low-cost sources of power generation, as energy is a key factor for the competitiveness in this business,” the Rio de Janeiro-based company said.

“On the other hand, Hydro is a major player in the primary aluminum industry, having captive power generation at competitive costs, technological expertise and growth potential.”

Around 3,600 Vale employees will become part of Hydro as a result of the transaction, the latter said.

The deal is expected to close in Q4, the companies added. Shares in Vale, the world’s largest iron ore producer, were trading down 1.3% on the NYSE on Monday afternoon.

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