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Vale SA ADR VALE

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Morningstar’s Analysis

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Vale’s Performance Lifted by Booming Iron Ore Prices Despite Poor Operating Performance

Mathew Hodge, CFA Regional Director

Analyst Note

| Mathew Hodge, CFA |

No-moat Vale delivered a second-quarter 2021 gross profit of USD 10.9 billion, a 36% increase from the first quarter. This was underpinned by higher iron ore prices which more than offset weaker base metals performance. Iron ore fines and pellets production surpassed the previous quarter by 11% to 84 million tonnes, supporting sales volumes to a total of 75 million tonnes, up 14% from the previous quarter. Elevated prices for Vale’s most important commodity more than offset a hit to cash costs from higher maintenance, equipment, and transportation costs. Volume guidance is unchanged and iron ore shipments are on track to meet our full-year 2021 forecast of 325 million tonnes of iron ore. At our unchanged fair value estimate of USD 19, Vale’s shares trade at a 10% premium with the elevated iron ore price more than compensating for any residual concerns about their tailings dam disasters.

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

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