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Vale SA: Assessing the iron ore giant’s overall position
Iron ore contributes the bulk of Vale’s revenues and earnings— 62% toward its revenues and ~80% toward its EBITDA. As a result, the volume and price outlook for iron ore are critical to determining Vale’s position in the industry.
Vale’s focus has shifted to free cash flow generation. In a low commodity price environment, this should ensure that the company can meet its liquidity and growth needs.
Moody’s changed the rating outlook for Vale SA to positive from stable in April 2014. It also affirmed the company’s Baa2 rating.
Valemax ships are ultra-large vessels, capable of carrying 400,000 dwt (dead weight tons) each. That’s 2.3 times more than traditional Capesize ships. They also emit 35% less CO2 per ton of ore transported.
Vale operates ports and maritime terminals mainly for the delivery of its iron ore and iron ore pellets to bulk carrier vessels serving the seaborne market.
There are limited resources of potash around the world. Canada, Russia, and Belarus are the most important sources, and each of these countries only has a few producers.
Vale’s proven and probable copper reserves totaled 1.39 billion tons at the end of 2013. Salobo mine accounted for ~80% of these reserves.
Analysts are watching Vale’s base metals division to see if it can offset the falling revenue from iron ore. The production profile is well supported by ramp-ups and productivity gains.
Vale SA is the largest manganese producer in Brazil, accounting for roughly 70% of the country’s market. The Azul Mine in Para is responsible for 80% of its output.
Vale SA (VALE) produces metallurgical and thermal coal through its subsidiaries. Vale Mozambique, operates the Moatize mines. And Vale Australia operates coal assets in Australia through wholly owned companies and unincorporated joint ventures.
Vale SA achieved $1.2 billion in recurrent savings in 2014. Chiefly responsible—selling, general, and administrative expenses—which fell by ~23%, and pre-operating and stoppage expenses, which were cut by ~46%.
The S11D project will increase the mining and processing capacity at Vale’s Carajas mining complex, where the company produces high-content ~67% iron ore.
Realized prices for iron ore vary depending on quality, moisture content, freight costs, and pricing mechanisms. ROM sales reduced Vale’s realized price by about $6 per ton in 2013.
Vale SA offers technical assistance to its customers and operates sales support offices in several cities. These offices monitor customer requirements and ensure timely deliveries.
Most of the big iron ore players, including Vale, BHP, and Rio, are increasing production to take advantage of the inherent economies of scale enjoyed by large companies.
Vale SA’s freight costs are much higher than its rivals’ costs because of its location. Brazil is almost three times as far from Asian markets as Australia.
Vale SA (VALE) is the world’s largest producer of iron ore and pellets. Pellets are manufactured by gathering together the powder generated during the ore extraction process.
Although there hasn’t been any recent cause for concern, and the government doesn’t interfere in the day-to-day workings of Vale, there’s always a risk that the company could be pushed into pursuing objectives that aren’t in the best interests of all shareholders.
Currently, the the private sector is leading significant expansion and major rehabilitation of Mozambique’s infrastructure. Vale itself is investing in the development of the Nacala infrastructure project.
Vale SA (VALE) is a Brazilian multinational diversified metals and mining company. It is the world’s largest producer of iron ore and iron ore pellets and the world’s second-largest producer of nickel.