Bloomberg News

Vale Is Best Way to Invest in Brazilian Iron Ore, Merrill Says

August 01, 2008

Cia. Vale do Rio Doce, the world's biggest iron-ore producer, trades at a discount to rivals and its shares are the best bet for investors as the metal price keeps rising, Merrill Lynch & Co. said.

``Vale is, in our view, the best way to play iron ore in Brazil,'' Merrill Lynch analyst Felipe Hirai wrote in a note to clients today. He reiterated his buy rating on Vale's American depositary receipts, which trade on the New York Stock Exchange and represent one common share in Brazil.

The Rio de Janeiro-based Vale is trading at a 40 percent discount (RIO:US) to the value of its iron-ore assets, compared with 20 percent discounts for peers including Cia. Siderurgica Nacional SA (CSNA3), Usinas Siderurgicas de Minas Gerais SA (USIM5) and MMX Mineracao e Matalicos SA, Hirai wrote.

Vale fell 22 percent this year on the Sao Paulo stock exchange, compared with a 6.5 percent decline in Brazil's Bovespa (IBOV) index. The company is the second-worst performer in a group of raw-material producers in the MSCI Brazil index.

The price of iron ore, the main raw material in steel, probably will jump 20 percent in 2009 and 10 percent in 2010, Hirai said in the report. Total iron-ore production in Brazil may increase to 734 million tons in 2015 from 376 million tons estimated this year, he wrote.

Vale fell 1.21 reais, or 3 percent, to 39.64 reais at 10:55 a.m. New York time in Sao Paulo trading.

To contact the reporter on this story: Fabio Alves in New York at Falves3@bloomberg.net

To contact the editor responsible for this story: Chris Nagi at at chrisnagi@bloomberg.net.


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Companies Mentioned

  • RIO
    (Rio Tinto PLC)
    • $49.76 USD
    • -1.13
    • -2.27%
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