Bloomberg News

Vale Freed of Collateral on 30.7 Billion-Real Tax Dispute

May 10, 2012

Vale SA (VALE5), the world’s biggest iron-ore producer, said Brazil’s Superior Federal Tribunal freed it from paying collateral while it disputes 30.7 billion reais ($15.7 billion) of taxes on overseas profit.

The injunction by the country’s highest court overturning a collateral order was a “favorable decision,” the Rio de Janeiro-based mining company said in an e-mailed statement today. An official at the court’s press office, who declined to be named because of internal policy, said the injunction won’t affect a final ruling on the levies.

Vale has challenged government claims for taxes on profit of foreign units since 2003 as China-led demand pushes up prices and shipments of iron-ore, nickel and other metals. The government claims, including interest and penalties, are relative to profit between 1996 and 2008, Vale said March 6. Brazil may also seek tax payments for the period starting 2009.

“We believe the decision is marginally positive for Vale because it reduces the risk of additional financial burden,” Sao Paulo-based Itau BBA analysts Marcos Assumpcao and Andre Pinheiro said in a note to clients today.

The decision by Brazil’s Supreme Court suspends all the payment demands and the requirement to post collateral while the courts assess the dispute, Vale said in today’s statement. The company on April 27 said it presented a bond worth 1.7 billion reais after a request presented by the Brazilian tax authorities.

Vale was unchanged to 39.22 reais at the close in Sao Paulo today, after dropping for five consecutive trading days. The stock gained 3.7 percent this year, less than the 5.2 percent increase in the benchmark Bovespa index.

To contact the reporters on this story: Juan Pablo Spinetto in Rio de Janeiro at jspinetto@bloomberg.net; Peter Millard in Rio de Janeiro at pmillard1@bloomberg.net

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


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