Vale S.A. (VALE), a Brazilian player in the metals and mining industry, declared its stake sale in the concession BM-ES-22A in Brazil’s Espirito Santo Basin. The company owned 25% of the stake in partnership with Statoil Brasil, the Brazilian branch of Norwegian energy company, Statoil. The total stake is valued at $40 million, payable in cash.
As per the company, the stake sell-off will save the company from spending around $80 million for the project as capital expenditure. Without having any expiry date fixed, the transaction is subject to regulatory conditions and approvals. The main reason behind the proceedings is the company’s objective of focusing on the core activities.
The decision to sell-off came within a month of the company announcing its capital and R&D expenditure plans for the year 2013. In the coming year, the company plans to spend $16.3 billion in capex, around a 7% decline from the $17.5 billion estimated in the year 2012.
In the latest reported quarter, 3Q12, the company reported a revenue decline of 9.8% sequentially and 34.5% y/y; ascribing the fall in revenue to the plummeting selling prices of its major products. Earnings faced a sharp decline of 37.3% sequentially and 66.2% y/y. Since then, Vale has been trying to dispose of its stake in the non-core projects so that it can shape up its core business well.
Vale S.A. is one of the world’s largest producers and exporters of iron ore and pellets. Vale holds a Zacks #3 Rank, which translates into a short-term (1-3 months) 'Hold' rating. The company keeps improving its competitiveness against rival companies, such as Rio Tinto Plc. (RIO) and BHP Billiton Ltd. (BHP), both holding a Zacks #3 Rank.
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