Bloomberg News

Vale Vows to Deliver Growth After Losing Title to Rio Tinto

January 30, 2013

Vale SA (VALE3) pledged to deliver on its growth projects after losing to Rio Tinto Group the title of the world’s second-largest mining company and failing to boost production of the steel-making ingredient.

Vale is “confident” it can deliver on its expansion plans and that will eventually be reflected in its share price, Chief Financial Officer Luciano Siani told investors yesterday at an event in Rio de Janeiro, where the company is based. Doubts may still remain among investors about Vale’s capacity to fulfill its promises, he said.

“Why Rio Tinto has today a higher market value than Vale if its iron-ore production is much lower? Because Rio Tinto has delivered iron-ore growth and we haven’t,” Siani, 42, said. “Vale has an incredible latent value and its management is absolutely committed to deliver and reveal that value.”

Vale, the world’s largest iron-ore producer, in October was surpassed by London-based Rio Tinto, which is currently valued $5.6 billion more than its rival, according to data compiled by Bloomberg. The Brazilian company is cutting investments, seeking partners and writing off nickel and aluminum assets after shares slumped to the lowest in almost three years in September amid weaker demand from China and Europe.

‘Re-rate’

“The strategic direction that the company’s management is pursuing is the correct one,” Deutsche Bank AG’s analysts led by Rodrigo Barros said in a note to clients today after attending the presentation. “Vale will re-rate in comparison to its global peers during 2013, as the results of Vale’s strategic initiatives become more evident.”

Vale is targeting 306 million metric tons of iron ore output this year, down 1.9 percent from an expected 312 million tons in 2012, it said Dec. 3. The company produced 322.6 million tons in 2011. Rio Tinto boosted its iron-ore production 4 percent to 253 million tons last year, it said Jan. 15.

Vale aims to boost its iron-ore output to 402 million tons by 2017 and recover lost market share as it develops low costs ventures including its flagship $8.04 billion Serra Sul project in Northern Brazil, Siani said yesterday.

“From the moment that what we are showing here becomes reality, we think there is potential for the future growth of Vale to be more evident on its share price,” he said about the projects. “We need to execute and deliver that strategy.”

China Growth

Iron-ore prices are supported by prospects of China growing as much as 7 percent a year, preventing a 2012-like slump, Vale Investor Relations Director Roberto Castello Branco said yesterday at the same event. Vale is optimistic about prices as China steel stockpiles recover amid increasing spending on infrastructure and construction, he said.

Vale fell 0.6 percent to 37.91 reais at 12:26 p.m. in Sao Paulo. The stock has lost 9.3 percent in the past year, underperforming Rio Tinto’s 2.7 percent decline.

BHP Billiton Ltd. (BHP) is the world’s largest mining company.

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: James Attwood at jattwood3@bloomberg.net


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