Vale news overnight, page-4

This issue seems to have escalated at Vale from my last post. A board member has resigned with some very strong thoughts about the govt interfering in Vale.

their net debt position is USD 16b as at 31/12/2023 and it appears their provision for dam failures may be far from inadequate if the USD 24b quoted below is anything to go by…

“Another reason for interference relates to talks on a new compensation agreement for the Mariana tailings dam failure, which could set a world record and result in more cash for the government and Minas Gerais and Espírito Santo states.”

Appears to be a push into other minerals, rail infrastructure and use IO as captive mines for steel production…Govt wanting to use vales balance sheet to fund infrastructure spending for the greater good of Brazil




https://www.bnamericas.com/en/news/brazils-vale-sees-new-round-of-boardroom-clashes


Brazil's Vale sees new round of boardroom clashes
BnamericasPublished: Wednesday, March 13, 2024
Mining Companies Legal issues / Legal AdviceFederal Government CommoditiesPrivate Investment

A new chapter in the drama surrounding Brazilian miner Vale's leadership selection has been added, as independent board member José Luciano Duarte Penido resigned.

"Despite respecting board decisions, in my opinion, the current succession process for Vale's CEO has been conducted in a manipulated manner, does not serve the best interests of the company, and suffers evident and nefarious political influence," Penido said in his resignation letter to which BNamericas had access.

The letter can be downloaded via the Documents box in the upper-right corner.

Penido also underlined that he no longer believes the company's "honesty of principles of relevant shareholders" that are supposed to help elevate Vale's governance to the level of a corporation are being respected.

"The board formed a majority cemented by the specific interests of some shareholders represented there, some with very personal agendas and others with obvious conflicts of interest," he wrote.

Vale said its board decisions are in compliance with the company's governance rules.

CEO Eduardo Bartolomeo has recently been confirmed to lead the company this year and, from early 2025, take on an advisory role until a successor is found.

His term would have ended in May 2024, but when he signaled his interest to serve another three years, the administration of President Luiz Inácio Lula da Silva tried to install former finance minister Guido Mantega, who withdrew swiftly as investors revolted. The government has influence through Previ, the pension fund of federal lender Banco do Brasil, which owns 8.7% of the company. Vale’s other major shareholders are Mitsui (6.3%), BlackRock (5.8%) and Brazilian conglomerate Cosan (5%).

The government claims Bartolomeo is too focused on short-term financial results rather than pushing large projects.

“Lula has seen recent surveys showing a drop in approval for his administration due to signs of economic slowdown and because of this, he pressures both the government's sectors and large companies, such as Vale, to increase their investments to boost the economy,” Luis Octavio Leal, chief economist at local asset management firm G5 Partners, told BNamericas.

"Lula in this current term is very sensitive to surveys on his approval rating because the 2022 election showed that the country is divided and any increase in discontent among the population will increase the chance of protests in the streets against the government, which could disrupt the administration," said Leal.

Vale is one of the Brazilian companies with the highest annual capex. Its 2024 plan involves US$6.5bn.

In addition to direct investments in mining, the company also plays a key role in rail projects. The government previously pressured the company to step up rail and mining investments and even enter the steel industry.

Mariana Compensation

Another reason for interference relates to talks on a new compensation agreement for the Mariana tailings dam failure, which could set a world record and result in more cash for the government and Minas Gerais and Espírito Santo states.

As talks for a new agreement are underway, the federal government accuses Vale of delaying tactics. A new agreement is “likely to reach 120bn reais [US$24bn], which is considered a fair value, but companies are offering around a third of that, which doesn’t make sense,” a government official involved in the negotiations told BNamericas, requesting anonymity.

The agreement would flush funds into federal coffers and provide resources for infrastructure. Other portions would go to victim families and Minas Gerais and Espírito Santo.

The dam was operated by iron ore pellet maker and Vale-BHP JV Samarco Mineração. Its collapse in 2015 killed 19 people and is considered the worst environmental catastrophe in Brazil’s history.

In 2016, the companies, Minas Gerais and prosecutors agreed compensation of 24.4bn reais, but opposition to the deal grew after Vale agreed to pay 37.7bn reais for a second tailings dam disaster in Minas Gerais in 2019 that killed around 300 people.