DEALTALK-Brazil’s Vale likely to sell rail, ships before mining assets – by Stephen Eisenhammer and Guillermo Parra-Bernal (Reuters U.S. – March 25, 2015)

(Reuters) – Brazil’s Vale SA may find it easier to dispose of giant ships and part of its stake in a rail logistics business before selling mining assets, as the world’s top iron ore producer looks to raise cash amid a price rout, according to four sources with knowledge of the situation.

Struggling with a slump in iron ore prices, Vale presented a list to investors in December of nine possible options to raise cash. Of the options, only a coal joint venture with Japanese trading house Mitsui & Co Ltd has been announced so far.

A number of the other eight options seem increasingly challenging as the risk associated with both Brazil and mining-related investments continue to mount, said three of the sources, who sought anonymity to speak freely about the matter.

At this point, selling a group of giant ore carriers known as Valemaxes, and disposing of a part, or all, of a 43.8 percent stake in rail freight firm MRS Logística SA seem the best options for Vale, those sources said. Vale declined to comment.

“The infrastructure and logistics play could help Vale unlock value more quickly than the mining assets, which markets are not pricing fairly,” the first source said, adding that “the cash impact of the former options is not great, creating a dilemma for the company.”

Vale needs cash to continue investing in a giant iron ore project in the Amazon, as prices for the steel making ingredient .IO62-CNI=SI touch the lowest level since the spot market began in 2008 amid slowing Chinese demand and additional supply from Australia.

The company’s new 90 million-tonne-per-year mine, known as S11D, is vital for winning back market share from Australian rivals. Chief Executive Officer Murilo Ferreira pledged the project is “untouchable” and will not be delayed to save cash.

Vale has to fill a $1.4 billion cash flow shortage this year, according to estimates by André Pinheiro, an analyst at Itaú BBA.

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