At Vale Day, company emphasizes iron ore production flexibility amid challenging scenario
12/06/2024
Vale CEO Gustavo Pimenta said the company is studying the Bahia Mineração (Bamin) project but no investment decision has been made. He commented on the topic on Tuesday (3), during Vale Day, a company meeting with investors, at the New York Stock Exchange. It was the first time the mining company spoke about considering the project.
“Bamin is one of many projects we evaluate, but there’s no approval yet. It’s simply due diligence that our team must conduct,” Mr. Pimenta told journalists in an interview following the event.
Bamin is a mining company operating the Pedra de Ferro mine in Caetité, Bahia, owned by Kazakhstan’s Eurasian Resources Group. The project also includes a segment of the West-East Railway (Fiol) and a port terminal in Ilhéus (Bahia) for iron ore shipment. Behind the scenes, there are rumors that the federal government is interested in Vale acquiring the asset, which is expected to require around R$30 billion in investments. This information was reported by columnist Lauro Jardim of “O Globo.”
During Tuesday’s (3) presentation at Vale Day, Mr. Pimenta emphasized that the company’s projects must align with its Vision 2030 framework: a superior product portfolio, customer proximity, and a results-oriented focus.
This vision is intended to help the company navigate a more challenging global landscape in the iron ore market in the coming years. Executives highlighted uncertainties ahead, such as the anticipated slowdown of China’s economy, potential increased protectionism in the U.S. steel market, and possibly weaker demand for iron ore.
Despite these challenges, the tone of the presentations suggested that Vale has enough flexibility to deliver strong results in iron ore over the coming years, based on the three pillars of its Vision 2030.
Mr. Pimenta, who took on the CEO role in October and attended his first Vale Day as the head of the company—previously serving as the CFO—stressed that the company considers $50 per tonne as the breakeven price for iron ore, the level at which it can sell without incurring losses. The commodity currently hovers around $110 per tonne, with market speculation of a potential drop to $90 per tonne next year.
To prepare for the anticipated market conditions in the coming years, Vale is banking on the strength of its production, product quality, and cost structure. On Tuesday (3), the company updated its iron ore production forecast, projecting about 328 million tonnes by the end of 2024, increasing to between 325 million and 335 million tonnes next year; between 340 million and 360 million tonnes in 2026; and stabilizing around 360 million tonnes by 2030.
By the end of this period, the production of agglomerates, which are higher-quality inputs aiding steel clients in decarbonization, is expected to reach between 60 million and 70 million tonnes. By 2030, the company’s average portfolio is projected to have an iron content of 63% to 64%, considered high by industry standards.
Among the projects expected to significantly increase the company’s capacity is Capanema in Minas Gerais, adding 15 million tonnes to production with tests commencing earlier than planned. Vargem Grande 1, also in Minas Gerais, is set to add another 15 million tonnes, and the S11D+20 project in Pará is anticipated to contribute an additional 20 million tonnes of iron ore with 65% iron content.
In the base metals sector, copper was a highlight at Vale Day, with current production of around 350,000 tonnes annually. The start-up of the Bacaba and Alemão projects by 2030 is expected to ensure production between 420,000 and 500,000 tonnes, with projections of approximately 700,000 tonnes between 2030 and 2035.
Meeting with the mining company’s leadership allowed federal government to explore Vale’s interest in other railway projects
11/20/2024
Brazil’s Transportation Minister Renan Filho met with executives from Vale on Tuesday (19) to advance negotiations over the revised terms of the renewed contracts for the Carajás (EFC) and Vitória-Minas (EFVM) railways. The two-hour meeting included Daniel André Stieler, Vale’s chairman.
According to sources, the meeting also served as an opportunity for the federal government to gauge Vale’s interest in other strategic railway projects.
Discussions on revising the concession fees for the railways have been contentious at times. Mr. Renan Filho previously threatened legal action to hold executives and public officials accountable for the original contract renewals, which he claims were unfavorable to the federal government.
At this stage, the minister is pushing for Vale to commit R$15 billion in investments, though the final amount has not been settled and may be spread over several years. This figure is already significantly lower than the R$27 billion initially demanded by the government earlier this year.
The Ministry of Transportation is under pressure from the economic team to finalize negotiations with Vale to secure revenue for federal coffers. Renan Filho’s aides have emphasized that the funds would be allocated to future investments, enabling the construction of new railways in Brazil.
Notably absent from the meeting was Vale CEO Gustavo Pimenta, who took over the company recently. However, the meeting was attended by Fábio Ferraz, Vale’s business director, and Marcelo Sampaio, the company’s regulatory affairs director. Mr. Sampaio previously served as executive secretary of the Ministry of Infrastructure and briefly led the ministry under the previous administration.
Representing the federal government were Dario Durigan, executive secretary of the Ministry of Finance, and George Santoro, executive secretary of the Ministry of Transportation.
Another topic reportedly discussed during the meeting was Section 1 of the Oeste Leste (West-East) Railway (Fiol 1), connecting Ilhéus and Caetité in Bahia. Vale has been linked to speculation about acquiring Bahia Mineração S.A. (Bamin), the company holding the Fiol 1 subconcession, which is struggling financially. Rumors suggest the government has pressured Vale to take over its competitor’s operations.
Since taking office, Renan Filho has focused on raising funds to expand Brazil’s railway network by renegotiating concession fees established during the Bolsonaro administration. In addition to Vale’s railways, the government is also seeking higher concession fees from Rumo (Malha Oeste) and MRS Logística (Malha Sudeste).
Government estimates initially suggested that R$30 billion could be raised for railway expansion, though recent projections have been revised to a more conservative R$20 billion.
When asked for comment, Vale stated it is in “advanced discussions with the Ministry of Transportation regarding general terms for optimizing the investment plans for the EFC and EFVM concession contracts, which are currently being executed in accordance with the terms established and disclosed to the market in December 2020.”
Bamin declined to comment on speculation regarding potential talks with Vale.
Mining company to cut list to three by July’s end, with CEO appointment expected in August
07/10/2024
Vale’s board wants to turn the page and is looking for an executive who can lead the company’s growth process — Foto: Leo Pinheiro/Valor
An initial shortlist of 15 potential candidates for Vale’s CEO position was made public Tuesday amidst the mining company’s troubled succession process, which has been dragging on since 2023. The names—most of them revealed by O Globo Columnist Lauro Jardim—include executives from major Brazilian companies, including Embraer, Gerdau, Klabin, and Engie. Only two are from the mining sector, two are foreigners, and only one is a woman, engineer Ana Zambelli, who has a long history in the oil and gas sector.
Valor found that this first selection, prepared by Russell Reynolds consultancy, has displeased Previ, the pension fund of Banco do Brasil’s employees, as it lacks a name closer to the government.
In the selection process, the head-hunting consultancy indicates some executives who are regarded as top priorities for the position and suggests candidates who are willing to participate in a second stage of the process. The idea is that three names would be selected by the end of the month and the selection would be completed by the end of August, according to people familiar with the matter. Valor did not have access to the scores each of these top candidates received.
Some of the company’s shareholders interviewed by Valor expressed dissatisfaction with the list prepared by the consultancy.
Names such as Cristiano Teixeira (Klabin), Gustavo Werneck (Gerdau), and Francisco Gomes Neto (Embraer) were well received by shareholders given their successful track record in their respective companies. Other names, such as Pedro Parente (EB Capital) and Antonio Maciel Neto (CAOA), are said not to represent the invigorating “new blood” that the company wants to bring in to grow again, according to sources. When contacted, none of the executives on the list returned the calls. The foreign executives cited, Pablo Di Si (Volkswagen) and Antonio Filosa (Jeep), would face resistance from shareholders. Mr. Filosa said he has not been contacted.
The selection carried out by the head-hunting consultancy focused on names linked to the industrial sector, according to one candidate who spoke with Valor. The list does not include executives linked to the financial market.
Some shareholders argue that Vale’s succession process should be accelerated to end the crisis opened by the expected change in command. However, the difficulty in finding an executive who could start immediately is highlighted as the main hindrance in the process.
Executives included in the list who spoke on condition of anonymity confirmed that immediate availability may be a problem but it could be negotiated. Some cite problems related to the environmental disasters caused by Vale’s dam bursts in Mariana (2015) and Brumadinho (2019), in Minas Gerais, although the company represents an important challenge in a seasoned executive’s career.
Behind the scenes, Previ, a key shareholder since Vale’s 1997 privatization, has been seen as the Brazilian president’s point of contact for the CEO succession process from the start of the Lula administration. This process has been marked by several government attempts to intervene in the company.
Sources close to Previ denied that there is any type of pressure to change or add names to the first list of candidates provided by Russel Reynolds. Valor found that the list was submitted on Monday (8) to the people and compensation committee, coordinated by Previ’s CEO João Fukunaga, who holds one of the pension fund’s two seats on Vale’s board of directors. Previ’s other board member is the company’s chairman, Daniel Stieler. The board met on Tuesday (9) and the list was discussed. Messrs. Fukunaga and Stieler did not immediately respond to Valor’s request for comments.
Some names close to the government that have been mentioned as possible candidates include Paulo Caffarelli, former Banco do Brasil CEO, and, more recently, Bruno Dantas, president of the Federal Court of Accounts (TCU). The first name cited was former Minister of Finance Guido Mantega, but this potential nomination wasn’t well received by the market. The discussions about the mining company’s succession divided the board. Other names mentioned during the succession process included Vale’s former CEO Murilo Ferreira, who was ahead of the mining company during the Rousseff administration, and Aldemir Bendine. Their names were not on Russell Reynolds’s initial list. Mr. Dantas did not immediately respond to Valor’s request for comments.
Vale’s CEO succession process has a defined governance protocol, and the company has announced a timeline for Eduardo Bartolomeo, the current CEO, to be replaced by December. However, the negative impact of this prolonged process on the company has prompted shareholders and managers to work towards expediting the CEO transition. Officially, these expedited dates are not part of the company’s publicly disclosed timeline.
Russell Reynolds’s first list will be narrowed down to reduce the number of candidates to three names. According to sources, there is an agreement under which the final list should include an internal candidate, who could be Chief Financial Officer Gustavo Pimenta. Then, there would be two other candidates to be appointed and the name of the new CEO would emerge from this list of three.
Valor found that in the first list, the consultancy made a selection by including candidates according to technical criteria. However, the final decision on whoever would move on to the next stage of selection will be up to Vale’s board of directors, currently comprised of 11 members, after two independent directors resigned. José Luciano Penido resigned in March when a letter signed by him criticizing the succession process became public. He made a recanting statement a month later and an internal investigation by Vale indicated that the succession process complied with governance. Last week, Canadian board member Vera Marie Inkster also resigned.
The board was reduced to six independent members, which is below the rules set by the company’s bylaws. Vale should call an Extraordinary General Meeting (AGE), on a date yet to be set, to reconstitute the board.
In a note released on Tuesday (9) night, the mining company informed that Russell Reynolds continues to provide the company with advisory services to select the new CEO. “The actions by Vale’s board of directors continue to be carried out as per communication to the market on May 1, 2024. Vale’s CEO succession process is carried out in compliance with the company’s bylaws and corporate policies, as well as the board of directors’ internal regulations and current legislation.” The company adds that Vale’s board of directors has not reached any conclusion to date regarding the list of candidates and reaffirms that it will keep the market posted on any relevant developments regarding the selection of the new CEO.
Vale’s management is pursuing an executive with a profile capable of taking the company back to growth after the problems that followed dam collapses in recent years. The company faces environmental licensing problems, especially in Pará, where its main reserves are located, in Carajás. According to sources close to the company, there is a mix of competencies to be observed in choosing the new CEO. That includes, for example, a required international experience in previous positions held by the executive. Another point pursued is that the executive has good communication skills and a focus on institutional relationships with stakeholders.
*Por Mônica Scaramuzzo, Francisco Góes, Stella Fontes, Kariny Leal — São Paulo, Rio de Janeiro
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