Vale's profit slumps well below forecasts; Cutifani rejoins company

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Brazil’s Vale, one of the world’s largest miners, reported a first quarter net profit down 59 per cent from a year earlier, far below analyst expectations, as profits were dragged down by weaker sales and lower iron ore prices.

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The company posted a net profit of $1.8 billion for the first three months of 2023, in a filing to Brazil’s main stock exchange on Wednesday, while analysts polled by Refinitiv had forecast a profit of $2.4 billion.

Last week, the miner had already reported a slip in iron ore sales volume, blaming it on port loading restrictions and supply chain rebalancing after strong sales in the previous quarters.

Revenues, meanwhile, fell 22 per cent to $8.4 billion, also lagging analysts’ $9.2 billion forecast. Meanwhile, costs rose 5.4 per cent to $5.4 billion.

Earnings before interest, taxes, depreciation and amortization came in at $3.6, below analysts’ $4.3 billion estimate.

Over the quarter, Vale said that prices for its iron ore had averaged $108.6 per tonne, down from the $141.4 per tonne it reported for the same period last year.

Vale is Sudbury’s largest private sector emploers. Its Sudbury holdings have been in operation for more than 100 years. With five mines, a mill, a smelter, a refinery and nearly 4,000 employees it is also one of the largest integrated mining complexes in the world. 

Sudbury products include nickel, copper, cobalt, platinum group metals, gold and silver.

Meanwhile, Vale has recruited former Inco and Anglo American Plc boss Mark Cutifani to lead an independent board that will oversee its new base metals subsidiary, while flagging “news” on a strategic partner by mid-year. 

Bloomberg News said Cutifani will join Jerome Guillen, a former Tesla Inc. executive, on the so-called energy transition metals board, Vale chief executive 0fficer Eduardo Bartolomeo said on an earnings call Thursday.  

In October 2006, Cutifani was appointed chief operating officer for Inco Limited and then Vale‘s global nickel business, based in Canada, after it bought Inco.

Vale, which makes most of its money from iron ore mines in Brazil, is looking to bring in fresh capital and expertise to grow its nickel and copper operations in Canada, Brazil and Indonesia at a time when battery-metal demand expands in the move away from fossil fuels. 

The separation plan, which includes the sale of a 10 per cent stake to a strategic investor, will also allow Vale to grow “inorganically” as the industry enters a consolidation phase, Bartolomeo said. But while there’s plenty of interest from prospective partners, the company will proceed with or without a partner, Bartolomeo said. Neither is taking the base metals unit public a “definitive option,” he said, according to Bloomberg.

“Obviously, an IPO down the road is a liquidity event you could pursue,” the CEO said. “But the fundamentals why we brought Mark in is to help us on execution. There are many ways of liquidity.”