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Vale SA ADR VALE

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Economic Moat

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Stewardship

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Elevated Iron Ore Price Sees Vale Return to Overvalued Territory Despite Production Challenges

Analyst Note

| Mathew Hodge, CFA |

No-moat-rated Vale’s second-quarter output improved but more slowly than we anticipated. Iron ore and pellet output continues to be impacted by lingering tailings dam management issues and the rise of coronavirus in Brazil. Production guidance for iron ore fines, which accounts for most Vale’s profit remains 310 to 330 million tonnes, but the company now expects output around the low end. We lower our forecast to 310 million tonnes from 320 million tonnes previously. Iron ore pellets guidance was also lowered by about 13% to 30 to 35 million tonnes, following a similar downgrade in the first quarter. Guidance for nickel and copper output is unchanged. The troubled African coal operations remain without guidance after it was withdrawn last quarter.

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Company Profile

Business Description

Vale is the world's largest iron ore miner and one of the largest diversified miners, along with BHP and Rio Tinto. Earnings are dominated by the bulk materials division, primarily iron ore and iron ore pellets, with minor contributions from iron ore proxies, including manganese and coal. The base metals division is much smaller, primarily consisting of nickel mines and smelters with a small contribution from copper.

Contact
Praia de Botafogo, 186, Offices 701 – 1901
Rio de Janeiro, RJ, 22250-145, Brazil
T +55 2134855000
Sector Basic Materials
Industry Other Industrial Metals & Mining
Most Recent Earnings Jun 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type —
Employees 71,149

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