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Vale S.A. (VALE)

  • May. 28, 2014, 12:10 PM
    • Iron ore prices are unlikely to rise over the next three months from their current trough, the lowest in nearly two years, China's top economic planning agency says.
    • "The period of China's high steel demand has passed, and iron ore demand is now rising at a slow pace of 3%-4% annually," the agency says.
    • Iron ore prices sank below $100/metric ton this week for the first time since September 2012, down 25% YTD to a low of $97.
    • Iron ore prices depend almost entirely on demand from China, which consumes two thirds of global ore supply and makes nearly half the world's steel.
    • Iron ore miners are broadly lower: CLF -3.6%, RIO -2.5%, BHP -1.2%, VALE -0.7%.
  • May. 19, 2014, 8:18 AM
    • Iron ore prices drop below $100/metric ton for the first time in nearly two years on worries that demand from China is being outpaced by increasing iron ore output from global miners.
    • However, WSJ reports that India's iron ore production could fall by nearly a third this year due to a new court decision that ordered an additional 26 mines to be shut down.
    • A top government mining official says the order may mean India's exports this financial year could end up near last year's level of 15M metric tons vs. expectations of a rise in output to ~22M tons; India exported as much as 118M tons of iron ore in 2009-2010.
    • Global iron ore producers include CLF, VALE, RIO, BHP.
  • May. 14, 2014, 9:50 AM
    • Rio Tinto (RIO +0.7%) seeks to assure the government of Guinea that its dispute with Vale (VALE) over rights to the world’s biggest untapped iron ore deposit won’t affect its plan to build a mine estimated to cost $20B.
    • Rio reportedly is telling officials that the dispute is a damages claim and not a claim for reinstatement of the mining titles in question, and will not impede the timely development of the Simandou project.
    • Analysts say the mine could produce as much 100M metric tons/year.
  • May. 9, 2014, 10:32 AM
    • Iron ore fell to $103.7/ton yesterday, the lowest since Sept. 2012, and Goldman Sachs believes $100/ton will become the new norm by year's end because of oversupply, seeing the global surplus jumping from 14M tons last year to 77M tons this year and 145M tons in 2015.
    • But J.P. Morgan remains bullish on shares of Vale (VALE -0.4%), even as it lowers its target price to $19 from $22.50, seeing "no cause for concern for Vale’s investment case, as the prices do appear to follow the spot price trend over multiple quarters, removing the Q/Q volatility.”
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  • May. 8, 2014, 9:46 AM
    • Nickel prices reach two-year highs after New Caledonia's government ordered Vale (VALE -0.4%) to suspend activity after a spill at a local site.
    • Nickel surged 41% in London trading this year after leading global miner Indonesia barred exports of raw ores in January.
    • With the nickel market already tightening on Indonesia and possible sanctions against Russia, the news adds to the general sense that the market is facing a supply shortage over the coming months, analysts say.
    • ETFs: JJN, NINI
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  • May. 7, 2014, 2:45 PM
    • BSG Resources, the mining arm of Israeli tycoon Beny Steinmetz, says it is initiating legal action against Guinea to stop the country from stripping it of the prized Simandou iron ore deposit.
    • Last week, Rio Tinto (RIO), the concession's former owner, filed a lawsuit against BSG, Steinmetz and BSG's former Guinean joint venture partner Vale (VALE), alleging they colluded to rob it of half its prior rights to Simandou.
    • BSG is seeking to warn off any rivals - including Rio and Vale - from taking control of its share of the deposit, valued at ~$5B.
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  • Apr. 30, 2014, 2:35 PM
    • Rio Tinto (RIO) is suing Vale (VALE) and Israeli billionaire mining investor Beny Steinmetz, alleging they conspired to steal mining rights to the highly prized Simandou iron ore concession in Guinea by bribing officials.
    • Rio lost half its interest in the property - valued in the billions of dollars - in 2008, when the Guinean government said it planned to give the stake to Steinmetz's BSG Resources, which paid a $200M bribe to the country's former mining minister, Rio claims; BSGR partnered with Vale to bring in iron mining experience and resources to develop the mine.
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  • Apr. 30, 2014, 11:14 AM
    • Vale (VALE -1.3%) reports a 19% Y/Y drop in its Q1 profit to $2.52B, slightly below the $2.59B analyst consensus, as its realized prices for iron ore fell to a four-year low.
    • Q1 net revenue fell 11% to $9.5B, the lowest level for any three-month period since Q1 2010; Brazil's seasonal rains limited production, typical for Q1, but lower prices for iron ore also chopped $1.3B from Vale's sales Q/Q.
    • Revenue would have fallen further if it were not for a 9.6% growth in iron ore output to 71.1M metric tons, the best Q1 result since 2008 but 13% lower Q/Q.
    • Vale received an average $90.52/ton of iron ore it sold, down 19% Y/Y and the company's lowest realized price since 2010.
    • EBITDA fell 22% Y/Y to $4.06B.
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  • Apr. 28, 2014, 2:32 PM
    • The commodities team at J.P. Morgan raises its 2014 and 2015 forecast for nickel, which it says will provide a much-needed boost for Vale (VALE -1.6%); ~90% of Vale’s EBITDA comes from iron ore, but the extent of the firm's change in its nickel price forecast is significant enough to lift Vale's 2014 and 2015 EBITDA by a respective 4% and 10%.
    • The firm revises its 2014 and 2015 price forecasts by 22% and 52% to $18,540/ton and $24K/ton, respectively.
    • The spike in nickel prices also will add $600M and $1.7B to 2014 and 2015 free cash flow estimates, JPM says, taking FCF yields to 10.3% and 9.4%, respectively, and ensuring 2014 FCF is enough to meet the 2014 minimum dividend of $4.2B without raising leverage (also).
  • Apr. 26, 2014, 12:12 AM
    • The government of Guinea has revoked mining licenses for Vale's (VALE) joint venture, ending the company's troubled quest to mine iron ore from the Simandou mountains, which are thought to hold some of the world's last major undeveloped deposits of high-quality iron ore.
    • Vale's next step is unclear, but the world's top iron ore producer is not necessarily barred from future mining licenses in Guinea.
    • The book value of Vale's stake in the venture stood at $1.1B at the end of last year.
  • Apr. 24, 2014, 5:54 PM
    • A Brazilian appeals court rules in favor of Vale (VALE) in a dispute over taxation of foreign units that last year forced the mining company to pay 22.3B reais (~$10B) in a settlement with Brazil's tax authorities.
    • Brazilian treaties with Belgium, Luxembourg and Denmark prevents Brazil from taxing the profits of Vale units in those countries, the court rules.
  • Apr. 9, 2014, 8:47 AM
    • A Guinean government committee set up to probe mining deals recommends that Vale (VALE) and BSG Resources be stripped of their rights to the Simandou iron ore project, potentially putting one of the world's most sought-after mineral deposits back into play.
    • The committee says BSG had obtained the rights to Simandou - in which it subsequently sold a 51% share to Vale for $2.5B - through corruption.
    • BSG has denied any wrongdoing; Vale says any alleged impropriety would have preceded its involvement in the project.
  • Apr. 2, 2014, 3:49 PM
    • Vale (VALE +3.9%) says it has suspended coal shipments from its mines in Mozambique after a Vale train carrying coal from the Moatize mining complex to the Indian Ocean port of Beira came under gunfire in an attack authorities are blaming on a former rebel group.
    • Portuguese-speaking Mozambique is the biggest destination for Vale's investments after Brazil, receiving 22% of the company's capital expenditures; Vale plans to spend ~$2B through 2015 digging a second coal pit at Moatize and aims to finish its $4.44B logistics corridor to the Nacala port by the end of this year.
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  • Apr. 1, 2014, 10:40 AM
    • J.P. Morgan cuts its 2014 iron ore price forecast by 6% to $118/metric ton, expecting demand from China will grow more slowly to 3.5% from 5% previously, while the likes of Rio Tinto (RIO), BHP and Fortescue (FSUMF) are expected to add ~100M metric tons of supply this year, adding pressure on pricing.
    • Iron ore climbed 4% in Shanghai to $116.8/ton yesterday, trimming the quarterly decline to 13%, meaning JPM basically is expecting iron ore prices to be at the current spot level this year.
    • The firm still likes Brazilian iron ore producer Vale (VALE), saying it will generate positive cash flow even at the lower iron ore price.
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  • Mar. 31, 2014, 2:15 PM
    • Vale (VALE +1.4%) warns for the first time it may lose its entire investment in the struggling Simandou iron ore mine in Guinea pending a review by the country's government.
    • The venture has been hampered by logistical obstacles and later accusations that partner BSG Resources used bribes to acquire the mining rights it now shares with Vale; the Brazilian miner does not say whether its losses could exceed the $500M paid upfront to BSG in 2010.
    • Vale recently posted its biggest quarterly loss since it went public in 1997.
  • Mar. 11, 2014, 3:34 PM
    • Fears of a China slowdown have sent iron ore prices tumbling, and BHP Billiton (BHP) and Rio Tinto (RIO) are warning of lower prices through this year, but J.P. Morgan analysts maintain a Buy rating on Brazilian iron ore producer Vale (VALE -1.5%).
    • The firm thinks iron ore prices and could test Sept. 2012 lows of ~$87/ton, but prices below $110-$120 should be temporary as weaker prices should make high cost producers uneconomical and, together with a potential resumption in restocking at lower levels, should act as a buoyant force on prices.
    • Also, JPM says Vale shares already have priced in a very pessimistic scenario, and valuations are attractive even with iron ore prices at $100/ton.
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Company Description
Vale SA is a metals & mining company. It produces & supplies iron ore, iron ore pellets, nickel, manganese ore, ferroalloys, copper, coal, phosphates, potash, cobalt & others.
Industry: Steel & Iron
Country: Brazil