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Vale Shareholders Get $500 Million Windfall From Iron Ore Rally

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October 3, 2013

Vale’s giant iron ore carrier, the 402,000 dwt MV Vale Brasil, Image Credit: Agência Vale

Oct. 3 (Bloomberg) — Vale SA, the world’s largest iron-ore producer, boosted this year’s planned dividend by 13 percent to $4.5 billion as prices for the steelmaking ingredient gain on surging Chinese consumption.

Holders of common and preferred stock will get about 43.7 cents a share as the second installment of the minimum dividend, which amounts to $2.25 billion after an additional $500 million payment is included, Vale said in a statement yesterday. That increases the total payment to shareholders this year to $4.5 billion, compared with a $4 billion target set by the Rio de Janeiro-based company on Jan. 28.

Vale, the world’s third-largest mining company, is slashing costs, selling assets and focusing on its most profitable projects as it seeks to recover margins and reverse a decline in its shares. The company paid $6 billion in dividends last year, half the record $12 billion returned to shareholders, including share buybacks, during 2011.

“Stronger-than-expected iron-ore prices, an improving demand outlook in China and asset sales are the main driver of the dividend uplift,” Leonardo Correa and Luiz Fornari, analysts at HSBC Holdings Plc, said in a note dated Oct. 2. “Management is aware the fastest way to generate a re-rating in the shares is via a higher dividend, which could make Vale the top dividend payer in its class.”

Vale rose 0.3 percent to 31.92 reais at 11:23 a.m. in Sao Paulo. The stock is down 22 percent this year, compared with a 13 percent decline for the Brazilian benchmark Ibovespa index.

Largest Exporter

Iron ore with 62 percent content delivered to the Chinese port of Tianjin has averaged $135.40 a ton in 2013, 3.7 percent more than last year, according to The Steel Index Ltd. Australia, the largest exporter of the raw material, yesterday raised its 2014 price estimates to $119 a metric ton from a $112 forecast in June, citing stronger-than-expected import estimates for China, the world’s largest consumer of metals.

Vale’s board will discuss the dividend proposal during a meeting on Oct. 17 and, if approved, the $2.25 billion payment will be made on Oct. 31, it said in the statement. It paid a first $2.25 billion tranche of this year’s dividend on April 30.

– Juan Pablo Spinetto, Copyright 2013 Bloomberg.

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