Vale strategy may not be business oriented: DBRS

CREDIT rating agency DBRS has not altered its ratings for Vale’s commercial paper, but is concerned about the Brazilian government’s influence over the mining giant after chief executive Roger Agnelli was pressured to step aside.
Vale strategy may not be business oriented: DBRS Vale strategy may not be business oriented: DBRS Vale strategy may not be business oriented: DBRS Vale strategy may not be business oriented: DBRS Vale strategy may not be business oriented: DBRS

Vale CEO Roger Agnelli

Blair Price

Controlling shareholders have nominated as his replacement Vale veteran Murilo Ferreira, who is well experienced in the company’s nickel and base metal businesses.

“The recent change to Vale’s senior management has highlighted the impact the Brazilian government has on the company and the ongoing concern that Vale’s strategy may not be fully business oriented, even though the new nominee for president of Vale appears well qualified and has experience with the company,” DBRS said.

“Although impressed with current results and near-term expectations, we remain cautious in terms of the longevity of the iron ore boom as new capacity comes onstream and as Vale continues to rapidly expand – often into less stable political jurisdictions. Furthermore, additional acquisitions, along with their heightened risks, are not ruled out.”

Meanwhile, the Brazilian Senate’s economic affairs commission is expected to meet on May 3 to investigate the role the government’s Finance Department played in Agnelli’s departure, according to Dow Jones Newswires.

With Ferreira expected to take over the reins on May 22, Brazilian magazine Veja has reported that Agnelli might start an asset management company, but did not cite any sources.

Notably, coal mining was not mentioned by Vale as part of Ferreira’s background.

The company’s $US1.3 billion ($A1.3 billion) Moatize coal project in Mozambique is expected to kick off mid-year, targeting 11 million tonnes per annum of production, including 8.5Mtpa of hard coking coal under first-stage development.

Vale established its coal business in Australia back in February 2007 after purchasing a portfolio of mines and projects from private company AMCI for $835 million, with Vale owning stakes of the Carborough Downs, Isaac Plains and Integra coal mines.

The company has also partnered with rival Rio Tinto over the world-class Simandou iron ore project in Guinea, which is expected to start production in five years.

While the Brazilian government privatised Vale in 1997, it still owns the dominant stake of the company through a development bank and a state-run pension fund.

Agnelli’s departure follows government criticism of the major iron ore exporter for not increasing investment in Brazil’s steelmaking industry.

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