Iron Ore

http://www.bloomberg.com/

Vale SA (VALE5) is replacing trucks with 23 miles of conveyor belts and building a second railway through the Amazon to cut costs and retake the title of world’s second- largest mining company by value from Rio Tinto Group (RIO).

Vale’s Serra Sul project, part of the Carajas mining complex in northern Brazil, is the industry’s most expensive project ever at almost $20 billion. It will also be the first major iron-ore venture to fully replace in-mine trucks with conveyor belts, according to the miner. The project, which has absorbed $1.8 billion in investment so far, will allow Vale to reduce mine-to-port costs at Carajas to about $15 per ton, half the company’s current operational cost.

Vale, the world’s third-largest miner by value, is seeking to recover ground in the seaborne iron-ore market that it has lost to Australian rivals since 2007. The Serra Sul project will aid Vale shares as it cut costs per ton by tapping richer grades with improved technology, said Jonathan Brandt, an equity analyst at HSBC Holdings Plc.

“It’s quite an impressive project,” Brandt, who visited the venture in September, said in an interview from New York. “It should substantially lower their average cost per ton.”

Brandt, the second-most-accurate Vale analyst on the Bloomberg Absolute Return Rank (VALE), estimates the company will be able to extract, process and deliver ore to the Ponta da Madeira port for export at $20 to $23 per ton once all costs are included. That would be among the cheapest iron-ore operations in the world, he said.

Read more

http://www.bloomberg.com/

Vale SA (VALE5) investors stand to benefit as a decade-long court battle over $15 billion in back taxes that’s been weighing on the miner’s stock nears an end.

The Supreme Court is set to rule by June on a similar case brought by Coamo Agroindustrial Cooperativa, a farming group from the southern state of Parana that’s suing tax authorities to avoid levies on profits from foreign units. A ruling in favor of the group would be in line with the legislation of most other countries, according to Peixoto & Cury Advogados, a legal firm that specializes in corporate law, including tax issues.

The case is being watched as a benchmark for Brazil’s biggest exporters — from Vale to beermaker Cia. de Bebidas das Americas to steelmaker Gerdau SA (GGBR4) — who are fighting a combined $44 billion in tax claims. A win would be a boon for Vale because investors have already priced in much of the tax losses, said Empiricus Research’s Roberto Altenhofen.

“The market is overreacting a bit about the chances of Vale having to pay all the taxes that are being claimed,” the analyst at the Sao Paulo-based consulting firm said in a phone interview. “It’s almost impossible to predict the outcome of this trial, but what we can say is that Vale seems to be willing to negotiate with tax authorities so a deal can be reached. Vale may end up paying something, but not the full amount.”

Read more