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Vale Streamlines Asset Portfolio

Zacks Equity Research

Mining giant, Vale S.A. (VALE) has been successfully implementing its strategy of expanding profitable assets and divesting non-core assets. In keeping with this strategy, recently the company sold its 44.25% stake in Fosbrasil to Israel Chemicals Ltd.

Fosbrasil, located at Cajati, Sao Paulo, is a producer of purified phosphoric acid. The transaction value was roughly $52 million. Completion of the deal is subject to customary conditions.

Additionally, on the same day, Vale sold all the common shares of its stake in Log-in Logística Intermodal S.A. The shares, roughly 28.7 million, were sold at a price of R$8.11 per share to generate roughly R$233 million.

Further, Vale recently completed the sale of Chile-based Sociedad Contractual Minera Tres Valles, to Inversiones Porto San Giorgio S.A, for $25 million. With a capacity of 18,500 metric tons of copper cathode per year, Tres Valles comprises several underground and open-pit mines.

A few days ago, Vale also sold 26.5% of its stake in VLI S.A. In the third quarter of 2013, Vale sold 35.9% of its stake in VLI. After the recent stake sale, Vale will hold 37.6% stake in VLI.

All the above divestitures were done to expand the profitable assets while getting rid of the non-core assets. Following this strategy, the company has been successfully reducing its costs and thereby increasing margins. With such initiatives and plans for the future, we believe that Vale is well positioned to reach its goal of cost reduction.

This Zacks Rank #2 (Buy) company currently has a market capitalization of $75.9 billion. Other stocks worth a watch in the industry include Cliffs Natural Resources Inc. (CLF), African Minerals Limited (AMLZF) and BHP Billiton Limited (BHP). While Cliffs Natural carries a Zacks Rank #1 (Strong Buy), African Minerals and BHP Billiton each hold a Zacks Rank #2.

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