Vale SA ADR

This is our first report on iron ore mining major, Vale SA. The company delivered a mixed set of results for the past quarter, failing to meet Wall Street expectations on the revenue front but managing an earnings beat. The management appears to be firmly remained committed to Brumadinho operation and disbursed nearly $320 million. In the quarter, Vale continued the decharacterization of the two structures, Dike 4 and Baixo Joao Pereira dam. The operationally challenging quarter made Vale revise its copper and iron ore guidance for the year. On the environment front, Vale is detailing the sanitization projects for affected communities. Vale completed the sale of its Midwestern system. Also, to sell its steel joint venture, CSP, in the Serra state, it signed an obligatory agreement with ArcelorMittal. The management concluded the decharacterization of the two upstream dam structures. The company is expected to go through a restructuring process and would be spinning off the nickel and copper units. Another core measure to derisk the company is its program to eliminate the upstream dams in Brazil. We initiate coverage on the stock of Vale with a ‘Hold’ rating.