Replies to post #279 on The Rising Influence of Rising Affluence

[DewDiligence]

LOL—Jim Cramer doesn’t know that VALE’s name is pronounced VAH-lay, not VAIL:

http://www.cnbc.com/id/32558230/site/14081545

If Cramer does not even know how to pronounce the company’s name, how much does he understand about its business?

[DewDiligence]

Iron Mine Is Key for Gabon's Next Leader

[VALE lurks as a potential savior for this project, which never got underway despite its immense prospects.]

http://online.wsj.com/article/SB125141201851765021.html

›Candidates in Sunday's Election Promise to Develop Nation's Rich Resources After 41 Years of Previous President's Rule

AUGUST 28, 2009
By DAVID GAUTHIER-VILLARS

Gabon is preparing to elect its first new leader in 41 years on Sunday, and one of the biggest issues for the 23 candidates is how to do what President Omar Bongo Ondimba had pledged until his death in June: use one of the world's last big untapped iron-ore deposits to transform the country into one of Africa's most prosperous economies.

The Belinga mine, nestled deep in a tropical forest, drew interest from top global mining companies, including Brazil's Vale SA. In 2006, Gabon awarded the project to a consortium led by China National Machinery & Equipment Import & Export Corp., known as CMEC, which was allowed to mine the iron without paying taxes related to production there for 25 years.

In exchange for the mine's entire iron-ore output, Chinese investors would build a 300-mile railroad, hydropower stations and a deepwater harbor to help develop the mine, Mr. Bongo Ondimba said. But work hasn't gone beyond the stage of feasibility studies.

"Belinga is a symbol of what must change in Gabon," said presidential candidate André Mba Obame during a recent visit to Paris. "We need to do away with incompetent ministers and rampant corruption; we need less talk and more action."

Much of the reason Gabon never got anywhere with Belinga -- touted as a national priority as far back as 1967, when Mr. Bongo Ondimba came to office -- has to do with the late president himself. During four decades in power, Mr. Bongo Ondimba was credited with keeping the former French colony at peace, far from the ethnic conflicts and civil wars that have ravaged many other African nations. But he has been widely criticized for not taking advantage of Gabon's substantial revenue from oil, timber and manganese exports to improve the economy.

Gabon, the size of Arizona, has a population of 1.5 million. Last year, the country reaped an estimated $9 billion from oil and other raw-material exports, enough to be as prosperous as some Middle Eastern oil states, economists say. But only 10% of its roads are paved, and Gabonese hit the streets last year to protest rising food prices. Gabon ranks 107th out of 179 countries in the 2008 United Nations human development index, which combines measures such as gross domestic product, life expectancy and literacy.

Critics say Mr. Bongo Ondimba regularly doled out contracts to friends for everything from building roads to setting up a health-care system, squandering the wealth.

"Some Gabonese may have appreciation for the stability that [Mr. Bongo Ondimba] brought to their country," said Monique Theron, a lecturer in history at the University of South Africa and a researcher with Consultancy Africa Intelligence. "But Gabon was not able to manage its wealth."

The leading presidential candidates all have said they want to revisit the Belinga mining agreement and speed up the iron project. Some said they would like to renegotiate the tax exemption.

CMEC didn't respond to messages seeking comment. A lawyer for CMEC declined to comment.

It is unclear whether a new generation of Gabonese leaders will succeed where Mr. Bongo Ondimba failed. All the leading presidential candidates occupied senior positions in the previous administration. Mr. Mba Obame was interior minister in Mr. Bongo Ondimba's last government.

"The idea that people who didn't change anything while they were in power will suddenly change Gabon is a joke," said Pierre Mamboundou, a candidate and a rare longtime opponent of Mr. Bongo Ondimba.

Mr. Mba Obame said experience gained with Mr. Bongo Ondimba was an asset.

The front-runner in the vote is Mr. Bongo Ondimba's son, Ali Bongo Ondimba, who has served as defense minister for the past decade. If he is elected Sunday, the younger Mr. Bongo Ondimba will break with his father's legacy, spokeswoman Clémence Mezui Me Mboulo said.

She said the Belinga project is decades behind schedule, in part because Gabon has been bogged down by a culture of "squandering and preferential treatments." The younger Mr. Bongo Ondimba plans to revisit terms of the project, Ms. Mezui Me Mboulo said. She cautioned that talks with CMEC would be difficult because Gabon lacks the financial resources to develop Belinga alone.

Vale, which lost out to CMEC in the competition to develop Belinga, said it would be willing to resume talks if the government reviews the contract.

In Gabon, the president must collect more votes than rivals in a single-round ballot. Even if some of the 23 candidates withdraw, the late Mr. Bongo Ondimba's successor could be elected with a small fraction of the vote. "There is a risk that Gabon's next president won't have a strong mandate," because he would likely be elected by a minority of voters, said Mr. Mba Obame.‹

[DewDiligence]

Vale Restarts Agua Limpa Mine

[The global demand for iron ore is recovering, evidently. Earlier this week, CLF increased workers’ hours at one its iron mines by 20%.]

http://www.reuters.com/article/marketsNews/idAFN0312782920090903

›Thu Sep 3, 2009 6:13pm EDT

RIO DE JANEIRO, Sept 3 (Reuters) - Brazilian miner Vale, the world's largest iron ore miner, on Thursday said it has restarted its Agua Limpa iron operation, which it shuttered earlier this year as the financial crisis cut into demand.

Vale (VALE) said the facility would produce at an annual rate of 5.4 million tonnes by the end of the year, 17 percent above its 4.6 million tonne annual rate in December, when it began scaling back operations.

The company has benefited from rising spot iron ore prices in recent months on growing demand in China and diplomatic frictions between Beijing and Canberra over the detention of executives from Australia's Rio Tinto.

China steel industry officials continue negotiating the annual benchmark pricing of iron ore even after the June 30 deadline as Chinese officials struggle to win greater price cuts from 2008 benchmark levels than other Asian clients.

A Vale executive in an interview with Reuters said the company prefers to maintain the benchmark system even as Australian rivals push for the increasing use of a growing spot market.‹

[DewDiligence]

VALE Reports 3Q09 Results

[This PR is from late October; the ASP per metric ton of VALE’s iron ore was $57, $48, and $80 in 3Q09, 2Q09, and 3Q08, respectively, which says most of what one needs to know about VALE’s quarterly results. Additional information is at #msg-40905300 (my annotations for VALE’s 2Q09 results), http://www.vale.com/vale_us/media/vale_usgaap_3t09i.pdf (3Q09 financial highlights), http://www.vale.com/saladeimprensa/en/releases/release.asp?id=19257 (full 3Q09 financial report), and http://www.vale.com/saladeimprensa/en/audio_video/multimidia_apresentacoes.asp?categoria=5&type=3 (3Q09 webcast slides).]

http://finance.yahoo.com/news/Vale-3rd-Quarter-2009-Webcast-prnews-2845136634.html?x=0&.v=5

7:33 pm EDT, Thursday October 29, 2009

RIO DE JANEIRO, Oct. 29 /PRNewswire-FirstCall/ -- Vale would like to share with you the highlights of its Webcast Conference, led today in Rio de Janeiro, Brazil, by VALE CFO Fabio Barbosa.

Main highlights of Vale's performance in 3Q09 were:

• Shipments of iron ore and pellets totaled 72.930 million metric tons, a 35.5% increase on a quarter-on-quarter basis.

• Operating revenue of US$ 6.9 billion, 35.6% more than the US$ 5.1 billion in 2Q09. Year-to-date (Ytd) revenue reached US$ 17.4 billion.

• Operational profit, as measured by adjusted EBIT (earnings before interest and taxes), of US$ 2.3 billion, 134.9% above 2Q09. Ytd adjusted EBIT was US$ 5.0 billion.

• Net earnings of US$ 1.7 billion, equal to US$ 0.31 per share on a fully diluted basis, against US$ 790 million in 2Q09. Ytd net earnings totaled US$ 3.8 billion.

• Investment reached US$ 8.9 billion in the first nine months of 2009 (9M09). US$ 6.0 billion was spent in sustaining capital, research and development and project execution, and US$ 2.9 billion in acquisitions.

• Investment of US$ 567 million in corporate social responsibility in 9M09, of which US$ 413 million was allocated to environmental protection and conservation and US$ 154 million to social projects.

Vale's 3Q09 results

Vale S.A. (Vale) announced a strong set of operational and financial results for the third quarter of 2009 (3Q09), returning to growth after the impact of the global financial shock. The improved performance reflects the company's underlying earnings power based on its world-class assets and strategic position, its efforts to weather the global downturn and the broadening of the economic recovery.

Vale continues to pursue sustainable shareholder value creation, implementing its growth strategy with tight discipline in terms of capital allocation, in line with its long-term vision for the mining industry.

According to Vale's CFO, Fabio Barbosa, the company's performance has given it a strong position in the international market.

"We see the future as promising; we haven't changed our minds about this. We have invested more than 60 billion dollars in our company in recent years and made major acquisitions, and this is a significant expression of confidence in our future," said Barbosa.

"We have an outstanding portfolio of projects in which we are investing. We are confident and looking for long-term opportunities for investment, and we are developing an impressive project pipeline. We also have various other potential projects for investment in the future," he said.

According to Barbosa, Vale continues to pursue sustainable shareholder value creation, implementing the growth strategy with discipline in capital allocation, consistent with a long-term vision of the mining business. "The global recession is coming to an end, with recovery taking place earlier and at a stronger pace than previously expected," he said.

"We expect the demand for imported iron ore into China to remain strong due to the steel demand fundamentals and the lack of competitiveness of local iron ore production. Strong growth in Chinese iron ore imports is being supported by the substitution of high-cost local production and the increasing carbon steel output", said Barbosa.‹