Vale Turning to Deals as Expansion Spending Thwarts Debt Fight – by R.T. Watson (Bloomberg News – July 28, 2016)

Vale SA is escalating its war on debt after making only modest inroads into its whopping $27 billion-plus burden last quarter.

The biggest iron ore exporter — and the most indebted miner in the world after Glencore Plc — reduced net debt by less than 1 percent in the second quarter even after generating cash for the first time in two years. Completing the industry’s biggest new mine, slightly lower prices from a year ago and a lack of major asset sales have inhibited Vale’s ability to deleverage.

Now, spending on the $14 billion S11D project is coming to an end, iron-ore prices are back above $60 a metric ton and Chief Executive Murilo Ferreira said Thursday that the company has “one transaction to announce next week” and another two by year-end as it looks to bring down debt to $15 billion.

“With more competitiveness, with the conclusion of the investment program, and with the management of the balance sheet, Vale believes it continues to be more and more well positioned,” Chief Financial Officer Luciano Siani said in a webcast presentation.

Strategy Shift

In February, Rio de Janeiro-based Vale signaled a major shift when it announced it was considering selling what it describes as “core assets,” such as a stake in S11D. The company previously said it would reduce debt via streamlining or the sale of non-core assets such as iron-ore carriers and a stake in a bauxite operation in northern Brazil.

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