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Vale SA VALE

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Morningstar’s Analysis

Valuation
Currency in USD
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Economic Moat

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Capital Allocation

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Vale Show Signs of Strong Recovery Underway; Maintain USD 17 FVE

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.

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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 Mar 31, 2021
Fiscal Year End Dec 31, 2021
Stock Type —
Employees 74,316

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