Vale Earnings: Solid Start to 2024, Though Lower Iron Ore Prices More Than Offset Higher Volumes

We retain our fair value estimate for no-moat Vale of USD 14.20 per share after its first-quarter 2024 result was in line with our expectations. Iron ore sales, the main driver of its earnings, rose 15% on the same quarter of 2023 to 64 million metric tons. Sales are typically lowest in the first quarter due to the Brazilian wet season and are likely to increase over the remainder of 2024, consistent with prior years. However, despite its solid start to the year, guidance was maintained, and the heavy weighting of sales to the remainder of the year means we make no change to our forecast for 305 million metric tons in 2024, similar to 2023. All things being equal, higher sales over the rest of 2024 will likely see unit cash costs decline from USD 23.50 per metric ton in the first quarter of 2024—modestly above Vale’s guidance—to within our unchanged forecast of USD 22-USD 23 per metric ton. We forecast 2024 dividends of USD 0.86 per share for a 7% forward yield. Vale also continues to buy back up to 150 million shares, which we think is value-accretive at current prices.