Vale SA (ADR)(NYSE:VALE) is holding some ground from the returning strength in iron ore prices. The company’s production and cost profile could enhance as S11D gets online by the end of 2016. However, S11D can also have an adverse impact on prices.
The highlights
Good news keeps on pouring for company, the leading iron ore producer in the world. Vale, like other big miners in the industry, has been facing a downturn in the commodities market. But unlike its competitors, the company also has a debt burden. The firm comes in the list of most leveraged miners. It had a net debt of over $27.5 billion at the close of 2Q2016. That’s more than the net debt of $26.5 billion recorded in the same period last year. A recent survey from Bloomberg indicates that Vale could substantially pare down its debt in the coming period.
The firm is reportedly closing its sale of entire fertilizer segment, which generated over $550 million in EBITDA last year, to an undisclosed buyer. However, the buzz is Mosaic Company (NYSE:MOS) is considering over acquiring the segment. Through this anticipated sale, the company could earn proceeds of as much as $3 billion.
The plans
Vale reported that it is planning three asset sales by the close of this year. It was followed by news that the company has reached a deal to sell 25% of rights of its gold mine’s planned production to Silver Wheaton Corp. (NYSE:SLW), which already has 50% rights of Salobo mine’s gold production. In addition, the company is pondering about selling a stake in its core iron-ore operations to an Asian firm for up to $7 billion.
Vale intends to raise funds through the planned asset sales and it will deploy the proceeds to bring down the debt to $15 billion. This may not be possible in FY2016, but the firm is working on completing some large deals.
