Bloomberg News

Vale to Have Deal ‘Discipline’ After Spurning Metorex Bid

July 19, 2011

(Updates with CEO’s comments starting in sixth paragraph, shares in last paragraph.)

July 19 (Bloomberg) -- Vale SA, the world’s largest iron- ore producer, will have discipline in making acquisitions, Chief Executive Officer Murilo Ferreira said, a week after he dropped out of bidding for South African copper producer Metorex Ltd.

The company will only make “opportunistic” acquisitions that bring shareholders returns, Ferreira said in an interview at company headquarters in Rio de Janeiro today. Africa is the “priority” for efforts to expand in copper output, he said.

Vale, aiming to boost production of the metal almost fivefold to 1 million metric tons by 2015, on July 11 dropped out of bidding for Johannesburg-based Metorex after China’s Jinchuan Group Co. trumped its $1.13 billion offer with a $1.36 billion bid. Last year, Rio de Janeiro-based Vale produced about 207,000 tons of copper.

“If it’s a deal that won’t generate returns for our shareholders, I’d rather not do it,” Ferreira said.

Ferreira, 58, replaced Roger Agnelli as CEO of Vale on May 22 after the Brazilian government criticized the company in the past two years for not spending more on domestic steel projects and for buying ships in China when the country was setting up its own yards. Since taking over, Ferreira scrapped a plan to sell shares of Vale’s fertilizers business in an initial public offering, cut its long-term iron-ore output forecast by 10 percent and announced a share buyback of as much as $3 billion.

‘Any Asset’

Vale is interested in “any asset” in the iron-ore, fertilizer, nickel, coal and copper markets as long as it creates growth and return for its shareholders, Ferreira said. Energy assets aren’t “on its radar,” even as rival BHP Billiton Ltd. has made such acquisitions, he said.

Ferreira, who just returned to Rio after two weeks visiting customers and suppliers in Europe, China, Japan and Australia, is seeking to “intensify” the company’s relationship with its shareholders.

“I want to strengthen the relationship with analysts and investors. It will be much more intense,” he said.

Vale scrapped its planned IPO of its fertilizers unit because it has low debt levels and doesn’t need additional resources to develop the assets, Ferreira said. Selling shares now would lead to discounts of as much as 45 percent in the value of the assets, he said.

‘More Clarity’

Vale, which is due to report its results for the second quarter on July 28, expects to finish an internal review of all its projects in the next 60 days, Ferreira said. The company will have “more clarity” on its long-term nickel and copper output forecasts after the review, he said.

Vale may report second-quarter profit before interest, taxes, depreciation and amortization of $10.1 billion, a record for the company, thanks to higher iron-ore prices and an increase in sales volumes, Leonardo Correa, an equity analyst at Barclays Capital in Sao Paulo, said in a note to clients yesterday. Profit may rise further during the third quarter “as iron ore volumes should increase and prices remain at very high levels,” he said.

Vale gained 17 centavos to 46.22 reais as of 4:34 p.m. in Sao Paulo. Before today, the stock lost about 5.1 percent this year, compared with a 15 percent decline in the benchmark Bovespa Index.

--Editors: Jessica Brice, Robin Saponar

To contact the reporter on this story: Juan Pablo Spinetto in Rio de Janeiro at jspinetto@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net


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