SEC says Vale misled investors over safety before dam collapse

Regulator accuses Vale of misleading investors about safety issues before the Brumadinho dam collapse — Foto: Agência Brasil
Regulator accuses Vale of misleading investors about safety issues before the Brumadinho dam collapse — Foto: Agência Brasil

Vale is in the crosshairs of the task force set up by the U.S. Securities and Exchange Commission to identify flaws or distortions in information provided by companies regarding ESG. In a document released Thursday, the regulator accuses the mining company of misleading investors about safety issues before the Brumadinho dam collapse in 2019, which killed 270 people and caused environmental damage.

According to SEC’s view, Vale manipulated safety audits and obtained fraudulent stability certificates since 2016. The regulator claims that Vale knew for years that the Brumadinho dam did not meet internationally recognized safety standards, but still ensured its stability certification in its sustainability reports.

The SEC’s complaint, filed in court in the Eastern District of New York, accuses Vale of violating antifraud and reporting provisions of the U.S. federal securities laws and seeks injunctive relief, disgorgement plus prejudgment interest, and civil penalties.

“While allegedly concealing the environmental and economic risks posed by its dam, Vale misled investors and raised more than $1 billion in our debt markets while its securities actively traded on the NYSE,” said Melissa Hodgman, associate director of SEC’s Division of Enforcement. “Today’s filing shows that we will aggressively protect our markets from wrongdoers, no matter where they are in the world.”

Vale denies the allegations, including the claim that its disclosures violated the U.S. law, and said in a statement to the market that it will vigorously defend itself. “The company reiterates the commitment it made right after the rupture of the dam, and which has guided it ever since, to the remediation and compensation of the damage caused by the event.”

It is the second accusation by the SEC involving a Brazilian company in 10 days. Last week, the regulator and the U.S. Department of Justice filed suit against the former CFO of IRB, Fernando Passos. IRB is listed in Brazil, but did a road show in the United States with false information about Warren Buffett’s investment in its stocks.

The ESG task force was created by the SEC in March. In the document, the SEC thanks the collaboration of the Brazilian Federal Prosecution Service, the Prosecution Service of Minas Gerais, and the Securities and Exchange Commission of Brazil (CVM).

The accusation did not affect Vale’s stocks, as investors seem to be more interested in the large buyback program launched by the company. Vale announced a buyback of up to 500 million shares, which corresponds to 10% of the shares with the public – a program that could cost it more than R$40 billion.

The company shares are still discounted compared with international peers precisely because of the negative history in ESG – the Brumadinho disaster was preceded by the one in Mariana, also in Minas Gerais – and its consequences in financial and regulatory terms.

The original story in Portuguese was first published on Valor’s business website Pipeline.

Source: Valor International

Vale stock once again among top recommendations

Vale tem maior lucro líquido nominal em um 1º trimestre na história |  Negócios | G1

In a year marked by uncertainties and volatility on the stock exchange, Carteira Valor, a portfolio of stock picks, enters December with a strong presence of the financial and commodities sectors in the selection process. Amid the fiscal risks and fears about the possible impacts of the new Coronavirus variant on the economy, the shares of large banks can be used as a form of protection for the investor’s portfolio. This is because they tend to oscillate little in times of stress. On the other hand, the increase in commodity prices tends to favor stocks linked to this segment.

The lead of the nominations went back to mining company Vale, appointed by nine participating brokerages. In addition to Vale, Petrobras and fuel distributor Vibra (former BR Distribuidora) reappeared on the Gerdau list, nominated five times each. The novelty in the sector is pulp company Suzano, also with three nominations.

The financial sector also gained new representatives in December. In addition to Itaú Unibanco, which remains in the selection with four nominations, Bradesco and Banco do Brasil are back on the list, nominated five and four times, respectively.

Finally, with three nominations each, are the shares of the Rede D’Or hospital network, repeating last month’s appearance, and of the shopping mall company Multiplan, which appears as a novelty and may benefit from trade movements at the end of the year.

Carteira Valor brings the ten most recommended shares by participating brokerages. Altogether, there are 19 companies that choose five shares they expect to appreciate during the month. Currently, the brokerages Ativa, Ágora, BB Investimentos, Banco Inter, CM Capital, Elite, Genial, Guide, Mirae, Modalmais, MyCap, Necton, Nova Futura, Órama, Planner, Safra, Santander, Terra and XP Investimentos take part in the portfolio recommendations.

Carteira Valor had a 1.01% drop in November, and benchmark stock index Ibovespa, 1.53%. In the 12 months until November, the portfolio had a loss of 0.87% compared to a drop of 6.41% in the Ibovespa. In the year, the portfolio has dropped 7.84%, while the main index of B3 had a loss of 14.37%.

For Órama’s analysts, the resumption of the global economy could result in a new super cycle of commodities, especially in iron ore. They say they believe developed economies will enter a period of stimulus through infrastructure investments, which will increase demand for ore.

“This growth in demand has significantly impacted commodity prices and, consequently, benefitted mining companies in general,” they said in a note. Órama highlights that Vale has some plants currently not in operation. Therefore, if there is a sudden increase in demand, it is able to meet it.

In the financial sector, Ricardo Perretti, individual strategist at Santander, says that his choice was based on the fact that Itaú is the largest national bank and is also present in 18 other countries. According to the specialist, one of its main advantages is the strategy that seeks to integrate physical agencies and digital ventures. Santander’s analysts’ recommendation for the shares has moved from “hold” to “buy” recently, especially given the bank’s good quarterly results.

According to Nova Futura’s analysts, the choice of Bradesco is justified because “it is a company with excellent fundamentals” and that it has a scenario of rising interest rates on the horizon that could be beneficial to the company, as it increases its earnings. “Another important factor is that among the large private banks, the company has the greatest possibility of growth.”

Source: Valor international

Bradespar to distribute Vale stock to shareholders

The announcement that Bradespar, Bradesco’s equity arm, will hold an extraordinary general meeting on October 15 to approve a capital reduction through the delivery of Vale shares to shareholders caused Wednesday a wave of optimism among the company’s investors.

On a day when the Brazilian stock market fell 1%, Bradespar’s common stocks rose 5.79%, one of the best performances of the trading session. The market’s assessment is that the operation unlocks Bradespar’s value by transferring to the shareholders 123,396,871 Vale shares which, at Wednesday’s closing price, would amount to R$11 billion.

The capital reduction also raised the suspicion in the market that it could be a first step towards the dissolution of Bradespar. The reason would be that with the transformation of Vale into a company without defined controlling shareholder, Bradespar would lose purpose. Vale is Bradespar’s only asset after it sold CPFL shares in 2018.

However, that it is not the intention of Bradespar’s controlling group and investors to dissolve the company, according to sources. Bradesco, via Cidade de Deus Companhia Comercial de Participações and other holding companies, holds about 27% of Bradespar, while 73% is with investors on the stock exchange. If only common shares with voting rights are considered, Bradesco holds about 70% of the company, while investors have 30%. According to the announced operation, the shareholders’ stakes will be the same, proportionally, but each one will have a piece of a smaller company.

The main reason to move forward with the operation was precisely to “unlock value” for shareholders since its shares trade at an “unjustified” discount considering the company’s equity value, sources close to Bradespar say. This discount would be in the range of 25%-30% and is justified by the company’s low liquidity.

“Shareholders don’t like holding companies because they prefer to make the decision to invest directly, and when they invest via a holding company, it [the holding company] makes decisions,” a source said.

Source: Valor international

Vale’s profits skyrocket 2,220% in the first quarter

Vale confirmed market expectations and announced Monday a net income of $5.5 billion in the first quarter of the year. In dollars, compared to the same period in 2020, the increase was 2,220%. Sales revenue was $12.6 billion, up 81.4% year-on-year. And earnings before interest, taxes, depreciation, and amortization (Ebitda) reached $8.35 billion, up 189.7% year-on-year. The results were driven by iron ore prices, the company’s core business.

Source: Valor international

After record high, market still sees gain for Vale

Vale shares have hit record after record in recent weeks and are now consolidating at levels above R$100, practically doubling in value since 2020. Asset managers and analysts say the Brazilian mining company still operates at a discount of approximately 30% in relation to global peers, which opens room for further gains. This gap should not be closed overnight and there is a certain skepticism about the size of the appreciation cycle of iron ore. In addition, the company is still struggling to extricate itself from the tragedies in Mariana and Brumadinho. On the other hand, demand for iron ore is high because the global economy is recovering.

Source: Valor international

Petrobras again among top stock picks

After leaving in March the Carteira Valor portfolio of stock picks – for the first time in more than four years – Petrobras is back on the list in April, recommended by three brokers. The recommendations are led by commodity producers. These companies benefit from both the internal and external scenarios and thus minimize the risks of local uncertainties caused especially by the pandemic and political tensions. Companies that performed well in 2020 also figure prominently in this month’s selection. Besides Petrobras, the name that also represents the commodities sector in April is Vale, which continues in the leadership, indicated again by 15 firms. Steelmaker Gerdau, oil company PetroRio, retailer Via Varejo, industrial company WEG, exchange operator B3, Itaú Unibanco, meatpacker JBS and software company Totvs also made it to the list.

Source: Valor International

BNDES sales more Vale stocks and pockets R$2.5bn

The Brazilian Development Bank (BNDES) sold Monday 40 million Vale shares in a block operation on the stock exchange that totaled R$2.54 billion. Morgan Stanley was the main bank in the purchase, according to sources close to the transaction. Even after the sale, BNDES still has around 2.32% of the mining company’s total capital. Valor found out that BNDES still has 121 million Vale shares. This number includes 117 million shares that were part of the shareholders’ agreement between the members of the mining company’s control block and another 4 million shares that were not linked to the agreement. The agreement expired on the 9th of this month and the shares linked to the document were free for sale, but the BNDES has not yet disposed of them.

Source: Valor International

Vale maintains iron-ore targets despite Chinese outbreak

Vale confirmed Tuesday it would not change the iron-ore output target for 2020 despite uncertainty caused by the coronavirus outbreak in China, its primary market, and severe rainfall affecting Minas Gerais in the last two months – the state host some of its mines. The mining giant expects to produce between 340 million and 355 million tonnes of fines, its main product. Investors who expected lower targets to prevail as the company keeps digesting the impact of Brumadinho reacted well to the announcement.

Source: Valor Econômico

Vale expects to settle Brumadinho cases by year-end

Vale expects to reach a final settlement by the end of the year for all claims from the collapsed dam in Brumadinho, Minas Gerais. The disaster at its Córrego do Feijão mine six months ago killed 248 people, while 22 remain unaccounted for. The company also indicated it is comfortable with provisions made so far to cover potential liabilities – the amount currently stands at R$23.2 billion. CFO and investor relations director Luciano Siani also hinted at cost reductions and higher output in upcoming quarters.

Source: Valor Econômico

Vale shareholders prepare for decisive meeting

Vale and its investors are in a countdown to the shareholders’ special general meeting on the 27th, considered the most important since the mining company was privatized in 1997. The meeting is expected to have record attendance and there is optimism that it will be possible to get support from shareholders to approve the conversion of preferred into common shares, the change of the company’s bylaws and the merger of Valepar, holding company that controls the mining giant, into Vale.

The presence of investors in the SGM is expected to top historical marks, sources said. Credit Suisse recently released a report showing that the latest general shareholders’ meeting of Vale, in April, had attendance representing 71% of the equity, the highest of the last ten years. The SGM is expected to be as big or bigger.

Vale will need the support of 50% plus one vote of shareholders to approve the items on the agenda, which depend on each other. Valepar and BNDESPar, investment arm of the Brazilian Development Bank, will abstain from voting at the SGM, with exception of the item regarding amendment of bylaws. Altogether, Vale has 255,000 shareholders and a capital of 5.1 billion shares, excluding shares held in treasury.

If the majority is secured in the meeting, a second step of the operation will begin. There will be a 45-day period, until the week of August 11, for preferred shareholders to decide whether they swap their shares for common shares in the mining company. Valepar set a floor of 54.09% of participation of preferred shareholders. It means that if the participation is smaller, the operation will not go ahead. This percentage was defined considering math according to which the controlling shareholders, once the floor is reached, will hold less than 50% in the company.

If there is conversion of 100% of the preferred (PN) shares, the current controlling shareholders gathered at Valepar (Bradesco, BNDESPar, Mitsui and pension funds of state companies, led by Previ, in addition to Electron, an Opportunity fund) will hold 41% of Vale. They are also forced to maintain 20% of that for three years, being cleared after that period to sell everything. It is known that part of the controlling shareholders, especially the pension funds, wants to give liquidity to their shares in Vale.

In case of approval of the proposals and achievement of the minimum number of shares for conversion, the following step, still in August, is likely to be the merger of Valepar into Vale, for which the controlling shareholders will get a 10% premium, estimated by the market at about R$4.5 billion. To migrate to the Novo Mercado special listing segment of B3 (former BM&FBovespa), Vale needs to secure the participation of 100% of the preferred shareholders. But this is not likely to be obtained in the near term, and the company set a three-year period, until 2020, for a possible migration.

Despite the optimism, there are risks for the operation. One is what the participation of individual investors will be. Vale doesn’t inform how much of its equity is held by individual investors, but Credit Suisse estimated in its report that individuals in Brazil hold 15.91% of the preferred shares in the mining company. The so-called passive funds, managed by banks, will also have a relevant role in the operation. Vale will make an online institutional campaign to inform small investors of the operation’s advantage, from its viewpoint.

Another point of concern is the position that Capital Group, largest holder of preferred shares in Vale, with about 20% of those shares, will take. Since Vale announced the transaction, in February, Capital privately expressed concern about the conversion ratio of preferred and common shares, which includes a discount of about 6% to PN holders. Valor has learned that some Capital funds manifested they will vote against the first item of the agenda, the voluntary conversion of preferred shares into common ones at the ratio of 0.9342 PN to one ON. Capital participates in Vale through three big groups of funds: Capital Research, Capital International and Capital World. Capital didn’t respond to a Valor email requesting comment.

People familiar with the matter say Capital’s vote against the conversion would be to mark a position, because later, in the 45-day window that will be opened after the SGM for conversion of stock, the trend would be for these funds against the conversion ending up joining the operation because of the risk of being left holding a share with little liquidity. Even though the proposed discount in the swap of PN for ON is 6%, there are estimates that, once the conversion period ends, this difference may increase to 15% or 20%, given the little liquidity expected for preferred shares.

Source: Valor Econômico