Replies to post #1464 on The Rising Influence of Rising Affluence

[DewDiligence]

VALE plans $2B share buyback and Hong Kong listing:

http://www.reuters.com/article/idAFSPG00306720100923

Despite being on the other side of the world, VALE sells the majority of its iron ore to China, so it makes sense for the stock to be listed in Hong Kong.

The share buyback is warranted by the modest valuation and strong cash flow (#msg-53592743).

[DewDiligence]

VALE declares final 2010 dividend of $0.335 per ADR, which makes the total 2010 dividend a 10% increase relative to 2009:

http://sec.gov/Archives/edgar/data/917851/000095012310093255/c06925e6vk.htm

The ADR trades ex-dividend on the NYSE today. ADR shareholders will be paid $0.285/sh on Nov 5 after deducting the 15% withholding tax.

(The above is based on an R$ to US$ exchange rate of 1.6554:1.)

[DewDiligence]

VALE Reports Record 3Q10 Results

[The latest quarter was almost too good to be true for the world’s largest iron-ore miner, raising the scepter of increased taxation by Brazil, which just elected a new leftish president. VALE’s own 3Q10 PR is at http://www.vale.com/en-us/investidores/press-releases/Documents/vale_usgaap_3t10i.pdf .]

http://www.reuters.com/article/idAFN2726587420101027

›Oct 27, 2010 6:43pm EDT
By Brian Ellsworth and Denise Luna

RIO DE JANEIRO, Oct 27 (Reuters) - Brazilian mining giant Vale on Wednesday said third-quarter profits rose more than 250 percent from the year earlier to their highest level ever as the company benefited from rising iron prices and higher output.

Vale (VALE), the world's largest iron ore miner, reported a record net income of 10.55 billion reais ($6.13 billion) that beat analysts estimates as demand for iron remains strong among emerging market nations such as China.

"These are the best results that Vale has ever reported in its history, marked by record operation revenues ... net profit and cash generation," the firm said in a statement.

The soaring profits may spur Brazilian politicians to seek higher mining royalties following similar efforts in countries such as Australia and Chile where governments are seeking a greater share of mineral wealth.

The company's strong cash position led it to announce in September it will buy back up to $2 billion in stock and to pay out a total of $2.75 billion in dividends by January -- a move that may further stoke the argument for higher taxes.

Earnings before interest, taxes, depreciation and amortization, a key cash-generation indicator known as EBITDA, rose 164 percent to 15.92 billion reais ($9.25 billion) compared to the same quarter a year earlier.

Five analysts consulted by Reuters had predicted Vale would post net income of $5.93 billion and EBITDA of $8.30 billion.

INVESTMENT BUDGET EXPECTED

Vale had already released production volumes for the quarter, which rose 24 percent from a year earlier to 82.6 million tones -- its second highest iron output ever and its highest since the global financial crisis took hold.

It invested $7.62 billion in the first nine months of the year, excluding acquisitions, out of a total of $14.2 billion planned for the year.

Chief Executive Roger Agnelli said last week the company needs $26 billion to $28 billion over the next two years to complete existing projects.

Vale is expected in the coming weeks to release its 2011 investment budget, which according to local media could be as much as $25 billion [it already did].

Before the end of the 2010 Vale expects to begin production at the Onca Puma nickel mine in Brazil, the Tres Valles copper project in Chile and an iron pellets plants in Oman.

Vale this year switched to a quarterly iron pricing system that replaced the aging benchmark arrangement in which iron prices were negotiated each year between steelmakers and the world's top three miners, Vale and Anglo-Australians BHP Billiton (BHP) and Rio Tinto (RTP).

That has allowed it to get a higher sale price for its ore by ditching the aging benchmark system based on annual talks.

Prices are now mostly set each quarter through indexes that are based on the spot prices, which topped $180 per tonne earlier this year but are now close to $150 per tonne.‹