Brazilian miner and iron ore producer Vale could raise about $13 billion with the sale of assets in the next few years, Itau BBA said this week.
According to Itau BBA, Vale’s disinvestments in the coal, fertilizer, iron ore, navigation and energy segments, associated to a higher cash generation resulting from better iron ore prices, should help Vale to reduce its capital gearing by 2017. Capital gearing is the ratio of a company's debt capital to its equity. In this sense, Vale could even pay higher dividends to its investors.
Itau BBA analysts Marcos Assumpcao, Daniel Sasson and Carlos Schmidt forecast Vale could sell a stake in its future iron ore output to a strategic partner or a financial partner, which is willing to accept some capital risk.
The analysts said that a sale of a Vale’s iron ore stake could result in $6 billion revenues for the Brazilian miner. In 2015, Vale sold a stake at MBR for a Bradesco fund for $1 billion. MBR is a subsidiary of Vale which holds, directly and indirectly, 98.3 percent of the company’s total capital.
On the other hand, a sale of a higher stake in iron ore could allow Vale reduce its risk in case of weaker prices for the commodity. Vale could also buy the stake back if market conditions improve.
Other potential sale of assets considered by Itau BBA include Vale’s coal business in Mozambique, which could raise some $3 billion for Vale, as well as other assets, including mining ships and a Vale’s stake at energy company Aliança Energia.