Catepillar was just forced to lower earnings again and the CEO now agrees with the banks that the surge we have seen in the metal sector is unsustainable. As long as Vale keeps executing their business model over the long run we should hopefully be fine. Another shot lower of I/o prices is not the end of the world, good luck board!
I understand your frustration, but just realize a few things:
1-This has been the worst depression in metal prices I can recall.
2-Many analysts are still predicting a fall into the 30's for I/o.
3-It was a very good quarter, but there is still much work to be done at Vale (reducing the debt, finishing the S11D project, cost cutting, and returning other areas within the company to profitability.
For me, the market wants to make sure this was not a one and done quarter before returning to previous quarters of losses, so I understand. Lets just hope the worst is behind us and Vale has stabilized for good. As of this morning it is already trading above $6, there have been no upgrades and the overall sentiment for the industry and particularly this company is still in the toilet. So, my takeaway at this point is when things finally do turn we have the capability to see some huge upside in this stock. Good Luck!
Management is doing all the right things, it is the debt which concerns me. Hopefully, they will be able to lower it to their target for next year, if they do Vale will head much higher, good luck!
What is important at this stage is for Vale to keep executing their plan for the future. If they can reduce their debt by the 10 billion next year (like they say) and also return to profitability then I do believe the stock price will follow. Even though I am in for the long run I would still like to be paid a dividend and that will not happen until the other 2 things happen. At least with a dividend I can keep reducing my overall cost per share. Good Luck!
PS-lets see what they say on Thursday.
I think one thing we can all agree on at this juncture is nobody knows where the price of I/o is going. The Aussies have already raised their forecast, I also remember (I believe it was) ABN Ambro who said the price would fall into the 20's before all was said and done. As long as Vale keeps executing its business and doing the right things the price of I/o over time will take care of itself. Good Luck!
Very high volume, plus it is bouncing all over the place. Wouldn't surprise me to see it turn green by the end of the day. In any event it is the longer term I am focused on, good luck
I would rather them not. Let the rest of the year play out and a floor be put in for I/o prices. Believe me pmcd, I want the divvy back also, good luck!
Thanks for all the info Golf, much appreciated. Also, the longer the price stays above $50 perhaps they will not have to sell any core assets.
I know we are supposed to still see a pullback in I/o prices, but if we could put a floor in at $50, wouldn't that be amazing.
I agree, believe me Golf I hope the rally is for real and the price stays above $50. I need Vale to make it back to $12, so I will be holding for a looooong time. Good Luck!
Can't really believe anything from Mr. Ferreira. Mackenzie over at BHP and now Alcoa says the rally in I/o will be short lived. They ought to know.
They now predict the price of I/o will be:
$45 for the remainder of 2016.
$56 for 2017
$61.40 for 2018
$64.70 for 2021
If 2017 holds true this will be great Vale. Good Luck Board!
With everything that has happened to Vale in the last couple of years wouldn't it be something if out of the big 3 Vale one day emerged as the strongest of them. With that S11D project coming on line and a definite rebound in I/o price down the road it is a possibility. Good Luck Board!
Early predictions are that the mine will add 19 million of capacity. If this indeed happens this will help to not be a drain of Vale's earnings in paying off the fine. Good Luck All!
Until a floor is put in on I/o this is going to continue to happen, China is holding all the cards, good luck!
I was VERY happy to hear about that possibility of a 15% stake in Fortescue. With the depression in metal prices I thought only BHP & RIO would be involved in deals. Even though the banks are still expecting a reversal in I/o prices I am starting to feel more positive about Vale. More clarity on the Samarco disaster helped also. Good Luck!
Vale May Take 15% Stake in Fortescue as Iron Ore Rebounds
March 7, 2016 — 4:37 PM EST
Updated on March 8, 2016 — 12:27 AM EST
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WUHAN, CHINA - APRIL 10: (CHINA OUT) A worker walks atop a pile of steel tubing at a steel product market on April 10, 2008 in Wuhan of Hubei Province, China. China's steel prices have surged 10 percent this year, and increased 23 percent in March compared with the same time last year, according to statistics from China Iron and Steel Association (CSIA). Since more steel products are required for reconstruction after the recent snow disaster and rising investment in real estate, the gap between demand and supply will be further widened. (Photo by China Photos/Getty Images)
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A haul truck is loaded by a digger with material from the pit of the Rio Tinto West Angelas iron ore mine in the Pilbara, northwest of Perth, Australia, on Sunday, Feb. 19, 2012. Photographer: Ian Waldie/Bloomberg News ***Local Caption***
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An employee works on an engine at the assembly line of a car factory in Qingdao, eastern China's Shandong province on March 1, 2016. Manufacturing activity in China shrank at its fastest rate in four years in February, government data showed on March 1, a fresh sign of sustained weakness in the world's second-largest economy. CHINA OUT AFP PHOTO / AFP / STR (Photo credit should read STR/AFP/Getty Images)
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Stake could be worth $1.1 billion based on Monday's close
Two companies could jointly develop new mines under accord
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Amid a record gain in iron ore prices, Vale SA, the world’s biggest producer, has signed an accord with Fortescue Metals Group Ltd. that could see the Brazilian company take a minority stake in the Australian miner owned by billionaire Andrew Forrest.
The agreement gives Brazil’s Vale the option to buy as much as 15 percent of Fortescue, the Perth-based company’s Chief Executive Officer Neville Power said Tuesday on a conference call. That would be worth about A$1.3 billion ($965 million) based on Tuesday’s close, according to Bloomberg calculations. The accord also allows the companies to to form joint ventures and develop new mines.
Iron ore soared the most ever Monday after China’s policy makers signaled their willingness to buttress economic growth, boosting the outlook for steel consumption in the top consumer. A joint venture between Vale and Fortescue to blend iron ore at Chinese ports may begin within six months and deliver about 80 million to 100 million metric tons of the steel-making ingredient, Power told reporters.
“Vale was already offering probably what could be considered the cheapest iron ore shipment price, and it streamlines their offering into China,” Evan Lucas, a market strategist in Melbourne at IG Ltd., said by phone. “It gives Vale entry into the Australian market that it didn’t have.” Fortescue is the fourth-ranked iron ore supplier.
Fortescue’s shares fell 9.4 percent in Sydney to close at A$2.79. Rival iron ore supplier BHP Billiton Ltd. fell 1.8 percent. Power told reporters that Fortescue’s 24 percent advance on Monday was in line with other producers and reflected the rise in iron ore prices. Vale rose 9 percent in Brazil on Monday.
Fortescue has surged 49 percent this year, boosted by efforts to cut costs and plans to make further reductions to its $6.1 billion debt pile. Talks with Vale have been ongoing for about a year, Power said, and Fortescue has held initial talks with regulators over their accord.
The pact will allow the companies “to work together to deliver long term value to our customers, through the efficient supply of an attractive and competitive new iron ore blend in China,” Power said Tuesday in a statement. Vale said in December it forecasts iron ore production in 2016 of 340 million to 350 million tons, while Fortescue expects to hold exports at an annual rate of about 165 million tons.
Vale last month flagged it planned more dramatic actionto cut $10 billion of debt, including the possible sale of some of the company’s key assets. It had previously been focused on cost cutting, moving to higher-quality deposits and selling less-important assets to withstand lower commodities prices.
David Wang, a Chicago-based analyst with Morningstar Investment, struck a note of caution on the timing of any Vale purchase.
“Any stake is unlikely to happen in the next couple of years since Vale doesn’t really have the capital to do so at this point,” he said. “In fact, the company is selling assets in order to be able to fund its expansion project. If there is an agreement to buy a stake it would be a couple years out.”
For Wang, the benefit of the tie-up lies in blending Vale’s higher grade product with Fortescue’s lower grade. “Vale’s premium product isn’t really getting the extra value they would be expecting right now, so this helps them avoid selling a premium product when they aren’t getting the full value,” he said.
The producer’s Samarco joint venture with BHP Billiton this month sealed an accord with Brazilian authorities over a tailings dam spill in November that killed at least 17 people. Samarco will pay at least $1.1 billion over the next three years under the deal.
Iron ore has powered higher in 2016 and jumped 19 percent Monday, the biggest one-day surge in daily data since 2009, to defy forecasts that it would post further losses as mounting low-cost supply from Australia and Brazil collides with weakening demand for steel in China. Investors are expecting further monetary easing by Chinese authorities, according to China Merchants Futures Co. Signs of property-price growth in Chinese cities is viewed as positive for metals prices, according to Sanford C. Bernstein. & Co.
“My strongest view would be that this deal could be to allow them to better control prices,” Gordon Johnson, a New York-based analyst at Axiom Capital Management Inc. said by phone. “The second reaction would be for Fortescue, they are doing this as they see the need for cash later down the line.”
Hebei Iron & Steel Group Co. and Tewoo Group Co. had approached Fortescue about acquiring a stake in its infrastructure assets and also considered buying stakes in some mines, people with knowledge of the matter said in August. Fortescue won’t now contemplate any sales of stakes in its infrastructure, Power said.
Fortescue also held talks with Baosteel Group Corp. and Japanese firms about the sale of stakes in some of its mines, people familiar with matter said in June. The producer acknowledged in March that it would consider selling minority stakes in mines, railroads and ports.
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A double from $2 is hardly anything to write home about. With the tremendous debt the company has, the state of the metal industry at the moment and yes indeed the supply glut, the welfare of the company in its current state is a concern for me as a shareholder.