Brazil's Vale sells CSA steel plant stake to Thyssen

* Deal removes obstacle to plant sale by Thyssenkrupp (LSE: 0O1C.L - news)

* Allows Vale to focus on core mining business

* Thyssenkrupp shares fall 5.2 pct after 48 pct gain (Adds details on possible Thyssenkrupp steel exit, analyst comments, shares)

By Georgina Prodhan and Tatiana Bautzer

FRANKFURT/SAO PAULO, April 5 (Reuters) - Vale SA has agreed to hand its stake in Brazil's CSA steel plant to majority owner Thyssenkrupp for a token sum, allowing the German company to contemplate relaunching a sale process and Vale to focus on its core mining business.

Germany's Thyssenkrupp will assume all of the loss-making plant's debt -- its liabilities totaled 2.6 billion euros ($3 billion) at the end of 2015 -- while Vale will get a share of the proceeds if the plant is sold within a certain period of time.

Vale's exit comes as it wrestles with the impact of slumping iron ore prices. Chief Executive Officer Murilo Ferreira said in February the firm was looking to sell about $10 billion of assets as it battles to reduce debt.

The deal, which confirmed a Reuters report from Friday, simplifies a structure that stopped Thyssenkrupp from selling the plant in 2013, when it sought an exit from the Americas but succeeded in selling only its U.S (Other OTC: UBGXF - news) . operations.

"That (the Vale stake) was the dealbreaker in 2013, not the purchase price," a Thyssenkrupp spokesman said on Tuesday.

The plant has a book value of 2.2 billion euros in Thyssenkrupp's accounts.

The deal comes less than a week after India's Tata Steel (BSE: TATASTEEL.BO - news) said it wanted to sell its loss-making British operations, sparking predictions that Thyssenkrupp could merge its European steel unit with Tata's remaining European plants.

Thyssenkrupp, whose steelmaking history goes back more than two centuries, has said repeatedly that it wants to take part in European consolidation of the steel industry, which is struggling to compete with cheap Chinese imports.

Further reducing its dependence on steel would allow it to concentrate on its other, more profitable businesses, which range from elevators to submarines to car parts. A partnership in steel could ultimately see such operations spun off as a separate business.

JIGSAW PUZZLE

"This (the Vale deal) is we think a further piece in the jigsaw puzzle of Thyssenkrupp's plans to exit steel," wrote Credit Suisse (LSE: 0QP5.L - news) analysts, who rate Thyssenkrupp (Amsterdam: TH6.AS - news) "outperform".

But MM Warburg analyst Bjoern Voss warned that any final deals were still far off and reduced his recommendation on the stock to "hold" from "buy".

Thyssenkrupp shares, which have gained 48 percent in the past two months, were down 5.7 percent at the bottom of the German blue-chip DAX by 1300 GMT.

The CSA steel slab plant in Rio de Janeiro state, once considered a showpiece for Brazil's steel industry, cost Thyssenkrupp and Vale $10 billion to build in the 2000s and was Brazil's most expensive ever foreign investment project.

But the production costs of the plant soared amid high inflation, currency volatility and a deep recession.

When Thyssenkrupp tried to sell CSA three years ago, potential buyers were put off by the complex rights and contracts associated with Vale's 27 percent stake.

The world's biggest iron ore producer, part-owned by the Brazilian state, has the right to appoint supervisory board members and supply raw materials to CSA and owns the port utilization rights used by the plant.

Those agreements will now be renegotiated or canceled.

The plant has total production capacity of 5 million tonnes a year and exports slabs that are further processed at Thyssenkrupp's former sister plant in Alabama and in Germany.

($1 = 0.8806 euros) (Reporting by Tatiana Bautzer and Guillermo Parra-Bernal in Sao Paulo and Georgina Prodhan in Frankfurt; Editing by Bernard Orr and Keith Weir)