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Vale Makes a Shareholder-Friendly Move

We expect more announcements to occur in the coming months that should be viewed positively.
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This morning, Vale (VALE) announced another shareholder- friendly move: a 15% sale of its 95% interest in the Moatize coal mine and half of its 70% interest in the Nacala Logistics Corridor for $763 million. Mitsui is the buyer.

The closing is expected in 2015 and after the transaction Vale would hold about 81% of the coal mine and a 35% interest in the logistics company. The money will be used to fund part of its capex and halves the commitment to the U.S. on infrastructure spending.

This is step one in the company’s process in raising $5 billion to $10 billion via divestitures and while not a surprising move (we highlighted this a month ago), we expect more announcements to occur in the coming months that should be viewed positively. Strengthening the balance sheet, shrinking the company size and eventually taking the base metals division public are all positive developments that the company is doing while the macro environment remains challenging. The company highlighted last week that its top priority was to pay out “a healthy” dividend and is taking actions to ensure that happens.

Following the news, the company will be net free cash flow breakeven for the year, which will improve going forward with further asset sales.

Regards,

Jim Cramer, Stephanie Link, and TheStreet Research Team

DISCLOSURE: At the time of publication, Action Alerts PLUSwas long VALE.