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Vale's (VALE) Q1 Iron Ore Production Declines 6% Y/Y

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Vale S.A. VALE reported iron ore production of around 63.9 million tons in the first quarter of 2022, down 6% year over year and 22.5% sequentially. The miner reported lower production primarily due to the heavy rainfall in Minas Gerais in January that halted the Southern and Southeastern Systems operations and the availability of third-party ore purchase for some time. Licensing delays at Serra Norte and lower-than-expected performance at S11D and Sossego also led to the lower output in the quarter under discussion. Major maintenance carried out during the quarter had an impact on production as well but is expected to benefit production for the rest of the year.

Vale maintained its iron ore production guidance between 320 Mt and 335 Mt for 2022. Pellet production is projected to be between 34 Mt and 38 Mt.

Sales volumes of iron ore fines and pellets were 60.6 Mt in the quarter. It marks a 35% slump from the first quarter of 2021. Compared with the fourth quarter of 2021, sales were down 8%. However, Vale achieved a solid premium of $9 per ton in the quarter — the highest level since the second quarter of 2019. This reflects Vale's high-quality portfolio and a tight supply-demand balance of high quality and low contaminant ores in the global market.

Vale's pellet production was 6.9 Mt in the quarter under review, up 10% from the last-year quarter, courtesy of improved performance in the Oman plant as a result of fewer maintenances activities. However, production was partially impacted by lower pellet feed availability at São Luis and longer-than-expected scheduled maintenance in the Tubarão 3 plant.

Copper production for the quarter was down 26% year over year to 56.6 kt in the quarter, mainly due to scheduled SAG mill maintenance at Sossego. Compared with the fourth quarter of 2021, copper output was down 27%. Vale sold 50.3 kt of copper, which reflects a 29% decline from the first quarter of 2021 due to the lower production in the quarter. The maintenance is expected to be completed by next month. Hence, Vale anticipates copper production to be closer to the low end of its guidance of 330-355 kt in 2022.

Coal production was 2 Mt, reflecting a year-over-year surge of 87.5%, driven by an improved performance following the plant's revamp. However, coal production was down 27.5% sequentially due to the Ana cyclone that hit the South of Africa in January and February.

Production of nickel was down 5.4% year over year and 4.6% sequentially to 45.8 kt in January to March period. Unscheduled maintenance in Onça Puma electric furnace, ramping up at the Sudbury mines after the labor disruption, repairs at the Totten mine shaft, and the ramp-up of the VBME project led to lower production in the quarter. Nickel sales were down 19% year on year and 13% sequentially to 39 kt due to the lower production. With Sudbury reaching pre-strike rates and Totten resuming operations, the company affirmed its nickel production guidance at 175 kt to 190 kt for 2022.

Cobalt production reached 755 metric tons in the quarter under review, up 6.3% from the prior-year quarter and 25.2% sequentially. Coal sales in the quarter totaled around 1.8 Kt, highlighting growth of 78% year over year but a decline of 32% sequentially. Gold production was down 17% year over year and 20% sequentially to 71,000 troy ounces in first-quarter 2022.

Nevertheless, higher iron ore and copper and nickel prices witnessed through the first quarter will somewhat negate the impact of lower production numbers on Vale's first-quarter 2022 results

Price Performance

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Shares of Vale have gained 33.7% so far this year compared with the industry's rally of 37.7%.

Zacks Rank & Other Stocks to Consider

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 are The Mosaic Company MOS, AdvanSix Inc. ASIX and Allegheny Technologies Incorporated ATI.

Mosaic has a projected earnings growth rate of 143.5% for the current year. The Zacks Consensus Estimate for MOS' current-year earnings has been revised 39.7% upward in the past 60 days.

Mosaic's earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed once, the average surprise being 3.7%. MOS has rallied around 98.5% so far this year. It currently sports a Zacks Rank #1.

AdvanSix has a projected earnings growth rate of 54.7% for the current year. The Zacks Consensus Estimate for ASIX's current-year earnings has been revised 43.6% upward 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 gained 13% year to date. The company sports a Zacks Rank #1.

Allegheny, currently sporting a Zacks Rank #1, has an expected earnings growth rate of 684.6% for the current year. The Zacks Consensus Estimate for ATI's earnings for the current year has been revised 20% 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 87% so far this year.


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