Brazil’s Vale Scraps Dividend in Face of Metals Slump – by Rogerio Jelmayer and Paul Kiernan (Wall Street Journal – January 29, 2016)

SÃO PAULO—Brazilian mining giant Vale SA is proposing to scrap dividends this year for the first time since it was privatized in the late 1990s, the latest symptom of a deep and prolonged slump in commodity prices felt from South America to Australia.

Management at Vale, the world’s top producer of iron ore and nickel, announced the zero-dividend proposal late Thursday as part of the company’s latest effort to shore up cash amid the downturn. It must still be approved by Vale’s board of directors, and, ultimately, by its shareholders at the company’s annual meeting in April.

“As the year progresses and we have more clarity on the market scenario, the board of directors may decide on the distribution of some remuneration to shareholders, provided that there is sufficient cash flow generation,” the company said.

Also on Friday, Ratings firm Standard & Poor’s downgraded Vale to one level above junk—a BBB- rating—saying low commodities prices will continue to pressure the company’s balance sheet and make asset sales difficult. The mining company offered no immediate comment on the move.

Vale’s move to eliminate its dividend comes as slackening demand for commodities, notably from China, has undermined prices for a wide range of raw materials from iron ore, copper, and nickel to oil, natural gas, and coal.

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