Vale seeks new dividend policy as debt falls – by Joe Leahy (Financial Times – March 18, 2018)

A new dividend policy to be announced by Vale should be based on a more sustainable cash flow generation rather than profits or debt, according to the chief executive of the world’s largest iron ore exporter.

“The one who will decide on the new [dividend policy] is the board but my preference is that it be linked in some form to the company’s cash generation, not necessarily the [financial] results,” Fabio Schvartsman told the Financial Times in an interview.

Vale has been struggling with how to deal with an industry cyclical downturn while trying to reduce a massive debt load. Its board is expected to decide on the policy this month as the Brazilian miner aggressively cuts debt, setting the stage for steadier cash returns for shareholders in coming years, analysts say. 

“What you can distribute without hurting the company is the cash you generate,” said Mr Schvartsman.
After investing heavily during the commodity supercycle of the first decade of the century, Vale reported a net loss for the fourth quarter of 2015 of about $8.6bn on a slowdown in China and plunging iron ore prices.

This was compounded by the disastrous collapse of a dam the same year at Samarco, a mine that Vale jointly owns with Anglo-Australian miner BHP.

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