Twitter

Vale

Vale Says Base Metals Unit May Be Worth Up to $35 Billion – by Juan Pablo Spinetto (Bloomberg News – December 2, 2014)

http://www.bloomberg.com/

Vale SA (VALE5), the world’s largest nickel producer, said it may raise cash selling a minority stake in its metals-producing unit worth as much as $35 billion as it faces lower commodity prices.

Chief Financial Officer Luciano Siani said the base metals unit, the company’s largest business after iron ore, may be worth between $30 billion and $35 billion. Vale will only consider selling the stake if the company can get a “fair price,” Chief Executive Officer Murilo Ferreira told investors during a presentation in New York.

“An IPO could be considered,” Siani said in an interview with Betty Liu on Bloomberg Television today. “We want to be ready sooner rather than later to take the opportunity when it presents itself very clearly if that’s the case.”

Vale, whose shares have dropped 43 percent this year, is seeking to move beyond a series of setbacks including strikes in Canada, plant faults in Brazil and an acid spill in New Caledonia. While its earnings outlook was boosted by nickel’s first-half rally, prices have plunged 18 percent from a Sept. 8 peak as Vale increased production.

Nickel output will climb to 303,000 metric tons next year while copper is forecast to rise to 449,000 tons, The Rio de Janeiro-based company said in its annual budget release today.

Read more

Brazil’s Vale mulling IPO for part of base metals business – sources – by Nicole Mordant and Euan Rocha (Reuters U.S. – December 1, 2014)

http://www.reuters.com/

VANCOUVER/TORONTO – Dec 1 (Reuters) – Brazil’s Vale SA is considering listing part of its global base metals business, two sources with knowledge of the matter said on Monday, as the miner looks to fund capital projects amid a collapse in iron ore prices.

The sources, who asked not to be named as they have not been authorized to discuss the matter publicly, said the world’s top iron ore producer is likely to retain a majority interest in the new entity if it proceeds with the plan.

Vale could outline the plan to list a new entity in Toronto and London as early as Tuesday at an investor day event being held in New York, said one of the sources.

The event at the New York Stock Exchange will be webcast. The second source said there had been significant discussion inside Vale about listing the base metals assets, which have fared better than its iron ore business due to steadier prices.

A Vale spokeswoman in Brazil could not be reached for comment after hours.

Vale’s iron ore business contributed 62 percent of the company’s gross revenue in the third quarter. Outside of iron ore, Vale’s global asset portfolio includes nickel assets in Canada, Indonesia and New Caledonia, coal mines in Australia and Mozambique as well as copper projects in Canada, Brazil and Zambia.

Read more

Globe-Trotting Vale CEO Faces Wall Street as Iron Plunges – by Juan Pablo Spinetto (Bloomberg News – December 1, 2014)

http://www.bloomberg.com/

Vale SA’s chief executive officer says he travels so much that the mining company’s executive jet is among the most flown in Bombardier Inc.’s fleet this year.

“I like to visit all our operations at least once a year but normally I go more than that,” Murilo Ferreira said in an interview at the company’s Rio de Janeiro headquarters on Nov. 26. “I travel a lot, a lot, a lot,” he said in a weary tone.

Ferreira, 61, will board his Global Express XRS jet to visit investors in New York and London this week, adding to the more than 240,000 kilometers (149,000 miles) flown in the first 10 months of 2014. On the agenda? How the world’s largest iron-ore producer will adapt to a collapse in the price of the commodity that prompted analysts to have the bleakest opinions about the stock since at least 1999.

Vale is producing iron ore at a record pace and its base metals unit — which for years experienced delays, accidents and stoppages — is finally starting to contribute to profits. Yet expanding global supply at a time of slowing demand in China, the largest consumer of metals, has pushed down prices of the steelmaking raw material to the lowest in more than five years and made Vale the worst performing major mining stock.

The reaction from Vale, as with other mining companies, has been to cut costs, put lower-return expansions on hold and focus on its most profitable businesses. The company probably will announce tomorrow a $10.4 billion budget for next year excluding research and development expenses, the lowest since 2009 and 25 percent below last year’s approved capital expenditures, according to the average of nine analyst estimates compiled by Bloomberg News.

Read more

Iron-Ore Giant Vale Sees Rebound as Glut Squeezes Mines – by Juan Pablo Spinetto and Peter Millard (Bloomberg News – November 27, 2014)

 http://www.bloomberg.com/

Iron-ore prices are poised to rebound from five-year lows as Asian infrastructure demand improves and high-cost mines close, according to the top producer Vale SA. (VALE5)

The steelmaking raw material, which slumped 49 percent this year to $68.49 a dry metric ton yesterday, will return to an average range of $85 to $90 next year, Chief Executive Officer Murilo Ferreira said in an interview. Prices jumped 2.2 percent today, the most in seven weeks. Vale isn’t considering slowing its expansions because of slumping prices and is pressing ahead with the $19.7 billion Serra Sul S11D mine and logistics project, the industry’s biggest, he said.

“There was a lot of volatility in prices this year and the market is undershooting at the moment and this will bring about a correction,” Ferreira, 61, said at the company’s headquarters in Rio de Janeiro yesterday. “This correction will come through the closure of many inefficient miners of high cost and poor quality iron ore.”

Vale, Rio Tinto Group (RIO) and BHP Billiton Ltd. are maintaining their expansions betting that higher-cost producers will be squeezed out of the market. The price plunge, including a 20 percent drop in the past three months, is prompting speculation China will close inefficient mines, while Cliffs Natural Resources Inc. is considering shutting a mine in Canada.

Read more

COLUMN-BHP, Rio were right on iron ore demand, wrong on supply – by Clyde Russell (Reuters U.K. – November 24, 2014)

http://uk.reuters.com/

LAUNCESTON, Australia, Nov 24 (Reuters) – What was lacking at BHP Billiton’s annual meeting was an admission that what has effectively happened with iron ore is that the company’sshareholders are subsidising the profits of Chinese steel mills.

Instead, what Chairman Jac Nasser told the media after the AGM on Nov. 20 was iron ore prices were “not inconsistent with the expectations we had built into our long-term investment”. Both Nasser and Chief Executive Andrew Mackenzie were keen to emphasize the productivity successes at the iron ore business, saying it remains one of BHP’s main profit drivers.

That may well be true, but the message from the executives at last week’s AGM doesn’t quite tally with what BHP was saying in 2011, when it was approving the massive expansion of its iron ore operations in Western Australia.

It was around this time that BHP, its Anglo-Australian rival Rio Tinto, newcomer Fortescue Metals Group and top iron ore miner Brazil’s Vale were all making decisions to radically boost output of the steel-making ingredient.

This unprecedented capacity expansion was based on the two-pronged view that China, which buys about two-thirds of seaborne iron ore, would continue its rapid growth for decades to come, and that low-cost producers would be able to force higher-cost miners from the market.

Read more

Roots run deep in Sudbury’s reclamation efforts – by Lindsay Kelly (Northern Ontario Business – November 21, 2014)

Established in 1980, Northern Ontario Business  provides Canadians and international investors with relevant, current and insightful editorial content and business news information about Ontario’s vibrant and resource-rich North.  

Still lots of work to be done, though

Forty years, $28 million and 9.5 million trees after reclamation efforts began, the moonscape that was once Sudbury is taking on a greener hue — but only half the job is done.

A total of 81,000 hectares have been impacted by the city’s industrial activity, which started with the logging industry in the early 1800s, and intensified in the early days of mining when open roasting beds sent high levels of sulphur dioxide into the air, raining down metal particulate across the landscape.

Since its inception in 1973, VETAC (the Vegetation Enhancement Technical Advisory Committee) has brought together volunteers from science, industry, academia, government and Sudbury’s citizenry to return the land to its original state, said Dr. Peter Becket, a reclamation, restoration and wetland ecologist with Laurentian University who’s dedicated his life’s work to the task. But it hasn’t been easy.

“The estimate is that we have about 7,000 hectares to do,” said Beckett, who gave the keynote address during the Nov. 20 gathering of the Sudbury chapter of the Canadian Institute of Mining, Metallurgy and Petroleum (CIM).

Read more

Go where it is darkest: When company, country, currency and commodity risk collide! – by Aswath Damodaran (Musings on Markets – November 20, 2014)

http://aswathdamodaran.blogspot.ca/

Aswath Damodaran is a Professor of Finance at the Stern School of Business at NYU.

You learn valuation (and find out how much you don’t know) by valuing businesses and companies, not by talking, reading or ruminating about doing valuation. That said, it is natural to want to value companies with profit-making histories and a well-established business models in mature markets. You will have an easier time building valuation models and you will arrive at more precise estimates of value, but not only will you learn little about valuation in the process, it is also unlikely that you will find immense bargains, because the same qualities that made this company easy to value for you also make it easier to value for others, and more importantly, easier to price.

I believe that your biggest payoff is in valuing companies where there is uncertainty about the future, because that is where people are most likely to abandon valuation first principles and go with the herd. So, if you are a long-term investor interested in finding bargains, my advice to you is to go where it is darkest, where micro and macro uncertainty swirl around every input and where every estimate seems like a stab in the dark. I will not claim that this is easy or comes naturally to anyone, but I have a few coping mechanisms that work for me, which I describe in this paper.

While I enjoy valuing companies with uncertain futures, there are cases where my serenity about valuation is disturbed by the coming together of multiple uncertainties, piling on and feeding of each other to create a maelstrom. In this post, I want to focus on two companies, one Brazilian (Vale) and one Russian (Lukoil), where bad corporate governance, a spike in country risk, currency weakness and plunging commodity prices have conspired to devastating effect on their stock prices.

Read more

Richest Woman in Asia-Pacific Buys Iron as BHP Calls End to Era – by Jasmine Ng and David Stringer (Bloomberg News – November 21, 2014)

http://www.bloomberg.com/

Gina Rinehart, the Asia-Pacific’s richest woman, is set to start exports in September from her new A$10 billion ($8.6 billion) iron ore mine undeterred by prices trading near five-year lows and forecast to extend losses.

“We don’t like the ore price going down, but we’re in the lower quartile” of production costs, Rinehart, chairman of Hancock Prospecting Pty, said yesterday in an interview at the Roy Hill mine in Australia’s iron-rich Pilbara region.

She was talking just hours after Andrew Mackenzie, chief executive officer of BHP Billiton Ltd. (BHP), called an end to the era of “massive expansions of iron ore.” BHP and rivals Rio Tinto Group (RIO) and Vale SA (VALE5) are flooding the global market, spurring a surplus after a $120 billion spending spree to boost the capacity of their mines from Australia to Brazil.

“I don’t think next year would be ideal to be adding new supply,” Daniel Morgan, a Sydney-based analyst at UBS AG, said in a Nov. 17. phone interview. “The market is pretty well supplied for the next few years.”

BHP stock lost 4.7 percent in Sydney this week for the biggest weekly loss since March, while Rio shares fell 6.1 percent. Fortescue Metals Group (FMG) Ltd., the country’s third-biggest shipper, retreated 54 percent this year.

Read more

OBITUARY: Engineer Walter Curlook was ‘Pied Piper of productivity’ – by Judy Stoffman (Globe and Mail – November 20, 2014)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Walter Curlook’s favourite film was the Danish drama Babette’s Feast. Perhaps this story, of a Parisian chef who takes refuge in an austere religious community, then spends all her money to prepare a sumptuous meal that awakens her hosts’ repressed senses, confirmed Mr. Curlook’s belief in generosity – sharing wealth to enlarge people’s horizons.

As a metallurgist, engineer and manager who spent his entire career as an executive at Inco when it was the world’s largest nickel miner, he understood how to create wealth as well as share it. Mr. Curlook, who died on Oct. 3 in Toronto of a brain hemorrhage at the age of 85, held 14 patents for improvements to nickel refining and played a role in the establishment of a science centre, a college and a research facility for particle physics in Sudbury that has no equal in Canada.

Brilliant and tenacious, he never stopped working. After he retired from Inco, he became an adjunct professor in materials science and engineering (unpaid) at the University of Toronto and donated $1-million to set up two laboratories there for the study of minerals.

“He was one of those people able to use a larger percentage of his brain than most of us,” his son Michael said. His daughter Christine Stinson recalled her father’s ability to be so absorbed in some problem that he would not hear his children speak: “He would sort of zone out and my mother would tell us, ‘Quiet – your father is thinking.’”

Read more

Vale has new base metals boss – by Staff (Sudbury Star – November 18, 2014)

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

Jennifer Maki has been appointed executive director of Vale’s Base Metals division after its previous executive director, Peter Poppinga, was named executive director of Ferrous Minerals for the company.

Maki has worked for Vale since 1993, and since January has been the chief financial and administrative officer for Base Metals. She also participated in the management of Base Metals businesses outside Canada.

Maki has an undergraduate degree in business from Queen’s University and a postgraduate diploma from the Institute of Chartered Accountants.

After working at PricewaterhouseCoopers for 10 years, Maki joined Vale as assistant controller, holding several positions including vice-president, treasurer and chief financial officer.

She has been a member of the board of commissioners of PT Vale Indonesia Tbk (PTVI) since 2007 and recently became its president commissioner.

As executive director of Vale’s Base Metals division, she will be responsible for the company’s operations in Sudbury.

Read more

‘It’s history, like it or not’: the Significance of Sudbury’s Superstack – by Mike Commito and Kaleigh Bradley (Active History.ca – November 17, 2014)

http://activehistory.ca/

Standing at a height of 1,250 feet, the Sudbury Superstack is the second tallest chimney in the world and runner-up to the CN Tower for the tallest structure in Canada. Until 1987, Sudbury Ontario had the dubious honour of having the world’s tallest smokestack. Today, the Stack is seen by some as a marker for Sudbury’s rich mining heritage but for others, it is also part of a much larger history of health and environmental problems.

Since the nineteenth century, Sudbury’s landscape was ravaged by the effects of the mining industry; over the years the vegetation disappeared with acid rain, and farmers found themselves unable to grow crops in the highly acidic soil. The International Nickel Company (INCO) built the Superstack in 1972 to disperse sulphur dioxide (SO2) and other pollutants away from the area, thereby addressing health and environmental concerns.

The Stack’s construction coincided with a community regreening movement, which has reversed some of the environmental damage. The Superstack redcuced local emission rates in recent years, but one could argue that INCO simply passed the buck, and the dispersion of SO2 became somebody else’s problem. Moreover, the Sudbury area continues to have higher rates of asthma and lung cancer than other parts of Ontario. But, for better or for worse, the Superstack has been a landmark along the Sudbury skyline for over forty years. And when Vale (formerly INCO) recently proposed demolishing the Superstack in the local media, we watched as an interesting public debate about the significance, history, and future of the stack ensued.

On November 3rd 2014, Kelly Strong of Vale announced that the company considered demolishing the Superstack. This news is not surprising and is in keeping with Vale’s ongoing $1 billion Clean AER Project, designed to reduce SO2 emissions.

Read more

NEWS RELEASE: Vale announces new Executive Directors for Ferrous Minerals and Base Metals

Rio de Janeiro, November 14, 2014 – Vale S.A. (Vale) announces today that Peter Poppinga will assume the position of Executive Director for Ferrous Minerals effective immediately, with the appointment already approved by the Board of Directors. José Carlos Martins, who previously held the position, has left the company to take on new challenges in his successful career. A Brazilian, Peter studied Geology at the Federal University of Rio de Janeiro (UFRJ), Brazil, and has an undergraduate degree in Applied Geology from the University of Clausthal-Zellerfeld, Germany. He also took extension courses in Mining Engineering and Geostatistics.

With more than 20 years of experience in iron ore, Peter began his career in 1984 at Samitri, an iron and manganese mining company, where he held various leadership positions in mine planning, iron ore production and sales and marketing. He also held shared responsibility for sales of pellet production at Samarco and was actively involved in the development of the Chinese iron ore market.

Peter joined Vale in 1999 in the Iron Ore Commercial area, where he held several positions in the company’s foreign sales offices, including Sales Director in New York and Belgium, and CEO of Vale International in Switzerland. In 2007, soon after the acquisition of the Canadian company Inco, he held several corporate positions in Toronto, Canada. In 2009, he returned to operations as COO of Base Metals Operations, Asia & Pacific, based in Australia.

In 2011, he was appointed Executive Director of Base Metals and IT, leading 16 operating sites around the world and driving major transformations and asset base optimization that turned the business around and delivered significantly improved results. During his tenure, Vale’s Base Metals EBITDA increased from US$ 600 million in 2012 to almost US$ 3 billion in 2014, due largely to increased productivity and the removal of 1.4 billion US$ in costs from the business.

Read more

Superstack Removal Symbolic of Mining Industry’s Green Efforts – by Steve May (Sudbury Star – Novmeber 15, 2014)

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

www.sudburysteve.ca

Last week in Sudbury, Kelly Strong, Vice President of Vale’s Ontario and U.K. Operations, announced that Vale was considering taking down the iconic Superstack – a symbol of both Sudbury’s mining prosperity and of environmental degradation.

Mining has a reputation of being one of the world’s least environmentally-friendly enterprises. Along with scars left imprinted on natural landscapes, toxic chemicals released from processing and refining poison our soils and water. Massive amounts of energy, often from fossil fuel sources, are used to power industrial mining processes.

Yet, the world has a voracious appetite for minerals and metals. According to the Ontario Mining Association, mining contributes approximately $10 billion annually to Ontario’s economy, and employs around 23,000 workers directly and in support activities. Although we could be doing a much better job at recycling existing mined materials, it is expected that demand for new resources will remain high.

The story of the mining industry’s impacts on the natural environment isn’t all that different from that of other industries, except perhaps for the scale. Throughout the 20th Century, the mining industry was prodded to clean up its processes coincident with the public’s demand for healthier communities. In the 1960’s, the publication of Rachel Carson’s “Silent Spring” kicked off an environmental awakening culminating in the early 1970’s with new federal and provincial laws to protect the environment. With the public demanding real action from government and industry, INCO, Vale’s predecessor, was at work planning to reduce dangerous emissions.

Read more

Sudbury should stack up just fine minus landmark – by Carol Mulligan (Sudbury Star – November 11, 2014)

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

It felt like a punch in the gut when Vale vice-president Kelly Strong dropped the bombshell last week the mining company was analyzing tearing down its Superstack.

What would the Nickel City be without the 381-metre (1,250-foot) chimney that has marked the landscape for 42 years? Strong told the Greater Sudbury Chamber of Commerce that because new smelting processes are more efficient and cleaner, the Superstack may no longer be needed.

Vale will decide by the end of the year whether to decommission it. If it goes that route, it would undertake another study to determine what to replace it with.

Strong wouldn’t say how tall a new stack might be, but he offered assurances Vale is looking at the volume of sulphur dioxide (SO2) emissions going up the stack and the height a new stack would have to be not to impact upon local residents.

Reaction to Strong’s announcement has been divided. People who lived in the Nickel Basin pre-1972 remember dark clouds of SO2 descending on them outdoors. You never forget the strong, acrid taste of sulphur burning the back of your throat.

Read more

Iron ore and the dangers of living by the sword – by Andy Home (Reuters U.S. – November 11, 2014)

http://www.reuters.com/

LONDON – (Reuters) – The price of spot iron ore has sunk to $75.50 per ton this week, its lowest level since 2009. The scale of the price collapse has been breath-taking. Iron ore has dropped by over 35 percent since the start of the year, a significantly worse performance than any other industrial metal.

But what’s really shocking is that the price is now at a level that until recently was collectively deemed impossibly low. It was only in April that José Carlos Martins, executive officer of ferrous and strategy at Vale, the world’s largest producer of iron ore, told analysts that “one thing is for sure, the price will not go below $110 on a sustainable basis”.

This was not irrational producer exuberance. Martins was only voicing the prevailing consensus view when he went on to argue that “we have many times seen the price going below this level but recovering very fast”. Well, here we are with the price trading not just below $110 but a lot lower still. And sustainably so.

That tells you that something has gone very wrong with the iron ore narrative. This market is in a place it was not supposed to be.

And while big producers such as Vale, Rio Tinto and BHP Billiton are sticking to that narrative, they are now facing the unpredictable consequences of a pricing war they collectively started.

Read more