Vale – Page 52 – Republic of Mining

COLUMN-Big iron ore miners supply strategy working partially – by Clyde Russell (Reuters U.S. – January 13, 2015)

January 14, 2015

http://www.reuters.com/

LAUNCESTON, Australia, Jan 14 (Reuters) – China’s record imports of iron ore in December capped a year of strong growth, while also proving that the strategy of the big miners is at least partially working.

China brought in 86.85 million tonnes of the steel-making ingredient in December, bringing the total for 2014 to 932.5 million tonnes, a gain of 13.8 percent over the previous year.

The jump in iron ore imports isn’t because China is producing more steel, with output of crude steel rising a mere 1.9 percent in the first 11 months of 2014 over the same period in 2013, according to official figures.

It’s also not because huge stocks of iron ore are being built up in warehouses, with inventories monitored by the Shanghai Futures Exchange SH-TOT-IRONINV dropping to 99.85 million tonnes in the week to Jan. 9, the lowest in 11 months.

The most logical explanation is that the 47-percent decline in the Asian spot iron price in 2014 .IO62-CNI=SI is displacing some high-cost Chinese domestic output.

This has been the strategy of the big three iron ore miners, Brazil’s Vale and the Anglo-Australian pair of Rio Tinto and BHP Billiton.

Ex-Xstrata CEO Seeks Second Act With Vale’s Nickel Assets in Mind – by Firat Kayakiran, Dinesh Nair and Jesse Riseborough (Bloomberg News – January 14, 2015)

January 14, 2015

http://www.bloomberg.com/

Mick Davis, who built Xstrata Plc into one of the world’s biggest mining companies, is trying to do it again.

Davis, a 56-year-old South African, is considering a bid for the nickel business of Vale SA (VALE), the world’s top producer, according to people with knowledge of the situation. Davis’s investment vehicle X2 Resources values Vale’s nickel business at $5 billion to $7 billion, said two of the people, who asked not to be identified because the negotiations are private.

Through a decade of 40 mergers and expansions, the onetime cricket umpire Davis increased Xstrata’s market value more than 80 times to $50 billion, and became the world’s biggest exporter of power-station coal. After it agreed to be acquired in 2012 by its largest shareholder Glencore International Plc in a $30 billion deal, Davis was to lead the combined company. The power-sharing agreement collapsed when Glencore Chief Executive Officer Ivan Glasenberg demanded the title.

Davis’s X2 has since raised about $4.8 billion from equity investors and has been hunting for assets to buy from the world’s largest miners such as Vale, BHP Billiton Ltd. and Anglo American Plc.

“Mick Davis is a strong and a driven individual who has been very successful,” said Vince Gauci, who was managing director of M.I.M. Holdings Ltd. when Xstrata acquired the Australian metals and coal producer for $3 billion in 2003. “I’ve no doubt that he’s still got the fire in his belly to start again.”

Ex-Xstrata CEO Davis Considering a Bid for Vale Nickel Assets – by Firat Kayakiran, Dinesh Nair and Jesse Riseborough (Bloomberg News – January 13, 2015)

January 13, 2015

http://www.bloomberg.com/

Mick Davis, former Xstrata Plc chief executive officer, is considering a bid for Vale SA (VALE5)’s nickel business, according to people with knowledge of the situation.

Davis’s investment vehicle X2 Resources values Vale’s nickel business at $5 billion to $7 billion, two of the people said, who asked not to be identified because the negotiations are private. There hasn’t been any formal negotiation between X2 and Vale about the assets yet, they said.

X2 has raised about $4.8 billion from equity investors including Asia’s largest raw-materials trader Noble Group Ltd. (NOBL), private-equity fund TPG Capital and sovereign-wealth and pension funds to create a mid-tier mining company. It has been hunting for assets to buy from the world’s largest miners such as Vale, BHP Billiton Ltd. (BHP) and Anglo American Plc.

Vale’s American depositary receipts, the equivalent of one ordinary share, erased losses and rose 1.4 percent to $8.67 at 2:35 p.m. in New York.

Vale, which as well as being the world’s leading iron-ore miner is also the biggest nickel producer, has already said it may try to raise cash from the business.

The company is considering the sale of a minority stake in its metals-producing unit, which it valued at as much as $35 billion, in an initial public offering, Chief Financial Officer Luciano Siani said Dec. 2. The unit includes copper as well as nickel.

NEWS RELEASE: OMA member Vale employees dig deep to support their communities

January 13, 2015

This article was provided by the Ontario Mining Association (OMA), an organization that was established in 1920 to represent the mining industry of the province.

The numbers are in and the joint fundraising campaign by nickel and copper miner Vale and the United Steelworkers brought in more than $865,000 for the United Way Centraide Sudbury and Nipissing Districts. Vale matches donations by its employees and this cooperative fundraising effort is the largest single contributor to the United Way in Sudbury.

“Vale employees are very committed to the communities in which they live and work,” said Kelly Strong, Vice President Canada and U.K. Operations for Vale. “Their ongoing generosity is incredible and something we can all be very proud of.”

This year’s effort, which surpassed the $865,000 mark, represents a 20% increase above last year’s campaign. “It never ceases to amaze me every year, USW Local 6500 members dig deep in their pockets to help those in need,” said Rick Bertrand, President USW Local 6500. “Their kindness, compassion and commitment is truly remarkable.”

“I would like to personally thank Vale and United Steelworkers for the overwhelming support provided over the past 32 years,” said Mike Di Brina, Sudbury United Way Campaign Chair. “To know that approximately $16 million have flowed into our community through the United Way is beyond what anyone could expect from one group.”

Iron Ore Extends Drop to Five-Year Low as China Economy Weakens – by Jasmine Ng (Bloomberg News – December 22, 2014)

December 22, 2014

http://www.bloomberg.com/

Iron ore sank to the lowest level since 2009 as supply exceeds demand and China, the biggest user, contends with its weakest expansion in almost a quarter century.

Ore with 62 percent content delivered to Qingdao, China, retreated 1.8 percent to $67.90 a dry metric ton, data compiled by Metal Bulletin Ltd. showed. That’s the lowest since June 3, 2009, and extends this year’s slump to 50 percent.

The steel-making raw material is headed for the biggest annual loss in at least five years as BHP Billiton Ltd. (BHP), Rio Tinto Group and Vale SA (VALE5) expanded output, betting increased production will boost revenue and force less competitive mines worldwide to close. Gripped by a property downturn and excess capacity, China is set to grow 7.4 percent this year, the slowest full-year expansion since 1990. Australia cut its price estimate for next year by 33 percent as a surplus builds.

“The falling price this year has been far deeper than anyone anticipated,” Andrew Hodge, an analyst at Wood Mackenzie Ltd. in Sydney, said before today’s prices were released. “China has had weaker than expected demand from its own residential property sector. For the big three, they have the lowest cost operations so there’s no reason to stop producing,” he said, referring to BHP, Rio and Vale.

The market needs to absorb a surplus of about 110 million tons next year, almost double the 60 million tons in 2014, Goldman Sachs Group Inc. estimated in October. The bank forecasts a price of $80 next year.

Vale SA: Overview of the world’s largest iron ore company – by Annie Gilroy (Market Realist – December 17, 2014)

December 19, 2014

http://marketrealist.com/

Operations

Vale SA (VALE) is a Brazilian multinational diversified metals and mining company. It is the world’s largest producer of iron ore and iron ore pellets and the world’s second-largest producer of nickel. It also produces manganese ore, ferroalloys, coal, copper, PGMs (platinum group metals), gold, silver, cobalt, potash, phosphates, and other fertilizer nutrients.

Vale has mineral exploration operations in 11 countries around the globe. It operates infrastructure systems in Brazil and other regions of the world, including railroads, maritime terminals, and ports that are integrated with its mining operations.

Its main operations are divided into four main lines of business:

Bulk materials – iron ore and pellets, manganese, ferroalloys, and coal
Base metals – nickel, cobalt, copper, PGMs and other precious metals
Fertilizer nutrients – potash, phosphate, and nitrogen fertilizers
Logistics infrastructure – railroads, maritime terminals, distribution centers, and ports
We’ll discuss these in detail in subsequent parts of this series.

Vale Loses Bid to Toss Rio Tinto Suit Over Guinea Mining – by Patricia Hurtado (Bloomberg News – December 17, 2014)

December 18, 2014

http://www.bloomberg.com/

Vale SA lost a bid to dismiss Rio Tinto Plc (RIO)’s suit alleging it conspired with Israeli billionaire Beny Steinmetz and his BSG Resources Ltd. to steal rights to the world’s biggest untapped iron-ore deposit by bribing officials in Guinea.

Rio Tinto accused Vale of passing confidential information it obtained during discussions the two companies had about Vale buying a stake in the Guinea property to Steinmetz and BSGR. Steinmetz, BSGR and Vale used that information to advance their own bid for the mining rights, Rio Tinto said in a complaint filed last year in federal court in New York.

U.S. District Judge Richard Berman in Manhattan today rejected Vale’s argument that the suit should have been brought in the U.K. because the two companies had agreed to take any dispute to an English court.

The judge cited “legitimate reasons” for keeping the case in the U.S., including Rio de Janeiro-based Vale’s alleged conduct in furtherance of the racketeering conspiracy, such as meetings between the company and London-based Rio Tinto that occurred in New York.

Berman also pointed to an existing federal investigation by Manhattan U.S. Attorney Preet Bharara relating to whether there was a scheme to siphon off Guinea’s mineral wealth.

Sudbury column: Big mining still tests city’s mettle – by Carol Mulligan (Sudbury Star – December 17, 2014)

December 17, 2014

The Sudbury Star is the City of Greater Sudbury’s daily newspaper.

Philosopher-poet George Santayana wrote, “Those who cannot remember the past are doomed to repeat it.” Sudbury’s largest employer and its largest trade union haven’t forgotten the past, but they are determined to leave it behind.

Last week, the president of United Steelworkers Local 6500 and the Canada/UK vice-president of Vale Ltd. held a news conference. Rick Bertrand and Kelly Strong sat side by side in the Steelworkers’ Hall, in itself significant, and signalled their intention to settle a new contract in 2015.

The former Inco and the union for production and maintenance workers historically made a show of exchanging proposals three months before a contract expired. That was all the public knew until they reached a tentative deal or the union went on strike.

Sudbury held its collective breath in contract years, getting antsy the year before. When the local had 12,000 members, the city’s economy rose and fell with its labour status. Decades of hard bargaining earned Steelworkers solid wages and good benefits, the spinoffs of which kept many of us working.

Advances in mining technology have decimated the miner’s blue-collar workforce to 2,700 members, and the city isn’t as dependent now on the labour fortunes of Vale and its union.

Mining’s ‘Cash Machine’ Promise Fades as Prices Crater – by Jesse Riseborough (Bloomberg News – December 8, 2014)

December 12, 2014

http://www.bloomberg.com/

BHP Billiton Ltd. (BHP) and Rio Tinto Group run the risk of taking on additional debt as a plunge in commodity prices threatens their ability to keep a promise of returning more cash to shareholders.

As the world’s two biggest mining companies reiterate pledges to bolster returns, a near five-year low in iron ore and coal prices raises the specter both will need to borrow to meet their dividend commitments. Along with rivals Glencore Plc (GLEN) and Vale SA (VALE5), the two companies are largely responsible for the supply glut that’s putting downward pressure on prices.

While investors demanded higher industry returns after $1 trillion was spent on acquisitions and new mines in the past decade, the prospect of companies “robbing Peter to pay Paul” doesn’t sit well with Clive Burstow, an investment manager at Baring Asset Management, which oversees $60.5 billion.

“If they start leveraging up the balance sheet just to give investors back some money, I’m not a great fan of that,” said Burstow, who has been reducing holdings of BHP and Rio this year. “That effectively means they are banking on there being higher commodity prices in the future.”

If current commodity prices prevail, BHP faces an estimated $5.4 billion shortfall to meet a forecast $6.6 billion dividend payout for the fiscal year ending June 30, according to Liberum Capital Ltd. mining analyst Richard Knights. That means the prospect of any additional return through a buyback is “very low,” he said. Rio’s estimated dividend shortfall is $1 billion next year, Knights said.

Will we see the return of Inco Ltd. to TSX next summer as Vale re-thinks base metals? – by John Barker (Soundings byJohn Barker.com – December 9, 2014)

December 9, 2014

http://soundingsjohnbarker.wordpress.com/

Iron ore accounts for three-fourths of Brazilian mining giant Vale’s revenue. With economic growth in China slowing and iron-ore production from Vale’s rivals in Australia speeding up, the benchmark price for the steel-making material has fallen to around $70-$75 per metric ton recently, little more than one-third of the 2011 peak of around $190 per metric ton. Mining analysts estimate that it costs Vale $67 to produce a metric ton of iron ore and ship it to China, making for a very tight profit margin at current commodity prices. Vale’s shares as of last week had fallen 42 per cent year-to-date. What to do?

Vale CEO Murilo Ferreira, in an annual presentation to investors Dec. 2, said the company is considering selling shares of between 30 per cent and 40 per cent of its base-metals division. The division is made up primarily of copper and nickel mines in Brazil, in Indonesia’s island province of Sulawesi, an hour’s flight north of Bali, on the southern tip of Grand Terre, the main island in New Caledonia, an overseas territory of France, east of Australia, and Canada, including nickel mining, milling, smelting and refining in Thompson, Manitoba, where copper and cobalt, along with associated gold, silver, platinum, sulphur, selenium and palladium deposits, are also mined.

The Initial Public Offering (IPO) would be intended, Ferreira said, to “unlock” value in the base metals division, although specifics haven’t been worked out nor has the sale been proposed to Vale’s board of directors. The Thompson smelter and refinery, which opened March 25, 1961, was the free world’s first fully integrated nickel operation and built at a cost of $185 million. Mining analysts believe Vale’s base metals division may be worth $30-billion to $35-billion, including the assumption of debt.

Mining’s ‘Cash Machine’ Promise Fades as Prices Crater – by Jesse Riseborough (Bloomberg News – December 8, 2014)

December 8, 2014

http://www.bloomberg.com/

BHP Billiton Ltd. (BHP) and Rio Tinto Group run the risk of taking on additional debt as a plunge in commodity prices threatens their ability to keep a promise of returning more cash to shareholders.

Vale London media briefing a virtual charade – by Lawrence Williams (Mineweb.com – December 8, 2014)

December 8, 2014

http://www.mineweb.com/

A briefing in London will not have earned Vale many media friends, given few questions generated any concrete answers.

LONDON (MINEWEB) – After much exhortation this writer attended the Vale Day annual media briefing in London and really wished he hadn’t bothered. The world’s No. 2 or 3 diversified miner, depending on whose figures one takes, might just as well not set this kind of thing up given the paucity of actual fact delivered.

Firstly the whole event was conducted in Portuguese with simultaneous translation. Now maybe I’m an arrogant Brit thinking that perhaps such an event should be conducted in English given that it was being held in London, but when one knows that most of the Vale executives who participated probably speak better English than the translator, the logic for conducting the whole media briefing in Portuguese perhaps falls away, or smacks of yet another degree of obfuscation.

Indeed a couple of the Vale execs did start to answer questions in English, but were quickly reminded to continue in Portuguese instead. Given that apparently an earlier investor briefing involving many of the same executives had indeed been handled in English, perhaps emphasises the point.

Vale’s CEO, Murillo Ferreira, should have been a politician. He was very adept at ‘answering’ questions, often at considerable length, without actually dealing with the precise query involved – or maybe it was just the simultaneous translation that didn’t convey what he was saying correctly.

‘Plan B’ puts Vale back in the driving seat – at a cost – by Samantha Pearson (Financial Times – December 2, 2014)

December 8, 2014

http://www.ft.com/home/us

For Vale, the world’s largest producer of iron ore, its location in Brazil has always been both its greatest strength and its biggest challenge.

On the one hand, its proximity to high-grade iron ore mines such as Carajás in the north of the country has turned it into a world leader in the industry and Brazil’s most international company.

Between January and October this year, iron ore ranked as Brazil’s second-biggest export just behind soyabeans, accounting for about 12 per cent of total shipments in value terms.

However, on the other hand, with its biggest mines more than 10,000 miles away from the key Chinese market, its geographical position has been its Achilles heel in its battle with rivals BHP Billiton and the Rio Tinto Group, located in Australia, much closer to Asia.

While demand from China is slowing, the country still accounts for 49.6 per cent of Vale’s total iron ore sales and Asia as a whole represents 65.4 per cent, according to the company’s third-quarter results.

As such, finding ways to reduce the logistics costs of these vast delivery routes has always been one of Vale’s top priorities. As the global commodity supercycle ends, pushing down iron ore prices worldwide, these cuts have become even more important.

Breaking up is easy to do: Potential ‘Inco’ IPO highlights mining sector’s new reality – by Peter Koven (National Post – December 6, 2014)

December 8, 2014

The National Post is Canada’s second largest national paper.

Speaking to an audience of mining industry professionals in Toronto, Tom Albanese made his message loud and clear. “The consolidation we are seeing heralds a new era that we have not seen before and probably won’t see again,” Mr. Albanese, then the chief executive of Rio Tinto Ltd., told the crowd. “We’re on the cusp of something huge.”

That speech was made in March 2008. It was highly appropriate at the time, as the global mining industry was in the midst of the biggest round of consolidation in its history. Just a few months earlier, Rio Tinto paid US$38 billion for Alcan Inc. In 2006, Inco Ltd. and Falconbridge Ltd. were acquired in twin deals worth around $20 billion each. And two years after that speech, BHP Billiton Ltd. tried and failed to buy Potash Corp. of Saskatchewan Inc.

But today, his remarks just seem silly. The great consolidation wave of the past decade, which so many experts said was permanent and irreversible, is being reversed in a big way. This week, Brazilian mining giant Vale SA said it may spin off its base metals unit in an initial public offering in Toronto, effectively bringing Inco back to life. BHP is spinning off (some would say dumping) US$15 billion of assets into a new company.

Other big consolidators such as OAO Severstal, Barrick Gold Corp., Kinross Gold Corp. and Cliffs Natural Resources Inc. are unloading assets for far less than they paid. And there are always rumours that Rio Tinto could shed its Alcan-led aluminum business as well.

Vale eyes possible return of ‘Inco’ to Canadian market as it mulls IPO for part of base metals unit – by Peter Koven (National Post – December 3, 2014)

December 3, 2014

The National Post is Canada’s second largest national paper.

TORONTO – Eight years after it disappeared, Inco Ltd. could be poised to return to the public markets in some form.

Brazilian mining giant Vale SA, which paid nearly $20-billion for Inco in 2006, said Tuesday it may sell part of its base metals unit in an initial public offering, likely on the Toronto Stock Exchange. That confirmed an earlier report from Reuters, and follows years of speculation that Vale could divest the business.

There are two logical reasons to consider it now. First, Vale wants liquidity as it plans a huge capital spending program next year amid low iron ore prices. More important, these assets are completely lost inside the huge Brazilian company.

“We believe there’s hidden value there,” chief executive Murilo Ferreira said in a press conference in New York. “We believe this value has to be better expressed.”

Vale calls itself a diversified mining company, but the vast majority of its profits come from iron ore. Even with iron ore prices plunging this year, that one commodity made up 80% of the company’s adjusted pre-tax earnings in the third quarter. It accounted for 97% of adjusted earnings in the same quarter a year ago, when prices were much higher.