The Rising Influence of Rising Affluence

[DewDiligence]

Vale Reports Record 2010 Results and Bullish Outlook

[VALE is the most bullish of the major iron miners (#msg-60355392); management expects the benchmark iron-ore price in 2Q11 to be as much as 20% higher than the already sky-high benchmark in 1Q11. (Note: the benchmark refers to ore with 62% Fe, which is lower than VALE’s ore content of 66-67%.)

Why is VALE not more concerned about increasing global supply of iron ore a few years from now (#msg-60355392)? Well, one reason for the lack of concern is that VALE itself will be responsible for much of the increase!

VALE’s detailed (35 pages) 4Q10 financial report is at:
http://us.lrd.yahoo.com/_ylt=AsSYLvTIv93AQbTExsxwTniw4sl_;_ylu=X3oDMTE2cnFhNXE0BHBvcwMxBHNlYwNuZXdzYXJzdGFydARzbGsDcGVyZm9ybWFuY2Vv/SIG=11im8ncj1/**http%3A//hugin.info/144918/R/1484279/428130.pdf . A separate 12-page report on production volumes is at: http://us.lrd.yahoo.com/_ylt=AvziNAi5q1U9Uhn9VdWDp9aw4sl_;_ylu=X3oDMTE2M3VqZTI5BHBvcwMxBHNlYwNuZXdzYXJzdGFydARzbGsDdmFsZTIwMTBwcm9k/SIG=11iva27v7/**http%3A//hugin.info/144918/R/1492368/428134.pdf . An abbreviated PR on the quarterly results is at:
http://finance.yahoo.com/news/Performance-Vale-2010-thomsonreuters-1744055756.html?x=0&.v=1 .]

http://online.wsj.com/article/SB10001424052748704150604576166510009889354.html

›FEBRUARY 25, 2011, 2:48 P.M. ET
By DIANA KINCH

RIO DE JANEIRO—Brazilian miner Vale SA is looking forward to "a very, very good year," following the company's record financial results in 2010, Chief Executive Roger Agnelli said Friday.

Mr. Agnelli told analysts on a conference call that "2010 was the best" and that "higher output of all our products, including iron ore, nickel and copper" bode well for 2011's results.

Global copper prices look set to reach record highs this year, the Vale CEO said.

Vale reported late Thursday that its fourth-quarter earnings rose nearly four-fold to $5.917 billion, contributing to a record-high annual profit of $17.264 billion, about 21% above its previous best in 2008.

Revenue, profit margin and investments also reached record levels, which the company said put it ahead of peers BHP Billiton Ltd., Rio Tinto, XStrata and Anglo American PLC.

"We don't see any major problems in 2011, January and February are going very well and the trend is positive," Mr. Agnelli said, adding that "we have to see if Libya and the Middle East problems may jeopardize the year."

Vale finance chief Guilherme Cavalcanti noted the company is in a strong position as it has $10 billion in cash, even after record investments of $19.4 billion, including in acquisitions and project development, last year. This year project investment will rise to $24 billion.

Mr. Agnelli said the company is seeking new copper reserves in Congo and Zambia as global prices and demand for the metal rise. "We're pushing our investments in Zambia," he said.

Vale plans to invest $80 million in 2011 at its Konkola North, Zambia, copper project after setting up a joint exploration venture in 2009 with African Rainbow Minerals in the African copper belt. Konkola North is due to produce 45,000 tons of copper a year after start-up in 2013, contributing to Vale's longer-term plan to produce 691,000 tons of copper annually from 2015, from mines in Brazil, Canada, Chile and Africa.

This year Vale expects to produce 332,000 tons of copper, up from 207,000 tons in 2010, the company said.

Vale executive director Jose Carlos Martins said fundamentals remain strong in the iron-ore market, with contract prices expected to rise in the second quarter from first-quarter levels. "The increase will be around 20%, with variations for quality," he said. "We now see prices stabilizing at a higher level than last year. Then there could be a new trend for prices to increase at the end of the year."

Iron-ore prices on the spot market currently stand at $184.1 a metric ton, up from an average price of $131.62 in first quarter 2010, according to London-based price provider The Steel Index.

Mr. Cavalcanti said demand is strong due to record crude-steel production in January, boosted by China's growing output, and limited global iron-ore supplies.

"Iron-ore availability will be limited for three to four years as no major new production project will come on stream during this period," he said.‹