Vale (VALE) Inks Deal to Divest Midwestern System Assets
Vale S.A. VALE announced that it has entered into an agreement to sell its iron Ore, manganese ore, and logistics companies that are part of the Midwestern System to J&F Mineração Ltda. This is in sync with the company’s strategy to simplify its portfolio and focus on bolstering production from its most profitable businesses. The enterprise value of the deal is approximately $1.2 billion.
The Midwestern System produced 2.7 Mt of iron ore and 0.2 Mt of manganese ore in 2021. The companies intended for sale (Mineracao Corumbaense Reunida SA, Mineracao Mato Grosso SA, International Iron Company and Transbarge Navegacion SA) together contributed $110 million toward Vale’s adjusted EBITDA in 2021.
The completion of the transaction is subject to necessary approvals. At the closing of the transaction, Vale will receive approximately $150 million. Vale will transfer to the buyer the obligations related to the take-or-pay logistics contracts, subject to the consent of the applicable counterparties and other liabilities existing in the assets of the abovementioned companies. The buyer will assume operations with all employees of the assets.
Vale has been selling non-core assets in a bid to focus more on iron, copper and nickel businesses. Last year in November, Vale sold all of its common shares of The Mosaic Company MOS for $1.26 billion.
Vale had received an 11% stake in Mosaic in 2016 after selling its fertilizer unit to the latter. Vale has concluded the sale of its manganese ferroalloy assets in Minas Gerais to the Grupo VDL.
These efforts will aid the company to capitalize on the growing demand for iron ore, copper and nickel. High demand along with rising iron ore, copper and nickel prices bode well for the top-line performance. Efforts to improve productivity, introduce more high-quality ore in the market and control costs will favor its results. Backed by its solid cash flow, Vale continues to lower debt levels while continuing to invest in projects that will drive growth for the company.
Price Performance
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In the past year, shares of Vale have gained 8.8%, compared with the industry’s growth of 8.1%.
Zacks Rank & Other Key Picks
Vale currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Some other top-ranked stocks in the basic materials space include AdvanSix Inc. ASIX and Allegheny Technologies Incorporated ATI.
AdvanSix has a projected earnings growth rate of 64.8% for the current year. The Zacks Consensus Estimate for ASIX’s current-year earnings has been revised upward by 58% in the past 60 days.
AdvanSix’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed once, the average surprise being 23.6%. ASIX has soared 78% in a year. The company flaunts a Zacks Rank #1.
Allegheny, currently carrying a Zacks Rank #2 (Buy), has an expected earnings growth rate of 661.5% for the current year. The Zacks Consensus Estimate for ATI’s earnings for the current year has been revised 45.6% upward in the past 60 days.
Allegheny’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 127.2%. ATI has rallied around 25% over a year.
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