Vale SA (VALE5), the world’s largest nickel producer, said it may raise cash selling a minority stake in its metals-producing unit worth as much as $35 billion as it faces lower commodity prices.
Chief Financial Officer Luciano Siani said the base metals unit, the company’s largest business after iron ore, may be worth between $30 billion and $35 billion. Vale will only consider selling the stake if the company can get a “fair price,” Chief Executive Officer Murilo Ferreira told investors during a presentation in New York.
“An IPO could be considered,” Siani said in an interview with Betty Liu on Bloomberg Television today. “We want to be ready sooner rather than later to take the opportunity when it presents itself very clearly if that’s the case.”
Vale, whose shares have dropped 43 percent this year, is seeking to move beyond a series of setbacks including strikes in Canada, plant faults in Brazil and an acid spill in New Caledonia. While its earnings outlook was boosted by nickel’s first-half rally, prices have plunged 18 percent from a Sept. 8 peak as Vale increased production.
Nickel output will climb to 303,000 metric tons next year while copper is forecast to rise to 449,000 tons, The Rio de Janeiro-based company said in its annual budget release today. Vale is reducing spending to $10.2 billion next year, a 26 percent drop from 2014 and the lowest capital expenditures since 2009.
2015 Capex
An IPO “would help to close the free cash flow-dividends gap in 2015, the year when the company’s current capex cycle peaks,” Morgan Stanley analysts led by Carlos De Alba said in a Nov. 30 note to clients. “The sharp drop in iron-ore prices this year has put a lot of pressure on Vale’s cash flow generation and its ability to cover next year’s capex.”
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