Analyst Note| Mathew Hodge, CFA |
No-moat Vale’s first quarter of fiscal 2021 showed signs of strong progress toward recovery. With iron ore prices at all-time highs, the miner delivered record first-quarter adjusted EBITDA of USD 8.4 billion. The resumption of halted operations and lower seasonal rainfall saw iron ore production rise 14% to 68 million tonnes versus first-quarter fiscal 2020. At our unchanged USD 17 per share fair value estimate, the shares screen as overvalued, but less so than peers. For instance, Vale trades at around a 20% premium to our fair value estimate versus about 40% for Rio Tinto and 60% for Fortescue. We suspect the lower premium reflects market pessimism following the Brumadinho dam tragedy and the financial repercussions surrounding operational reparation and remediation costs.