Vale Production Results for 1Q15: Weather a Major Player (Part 5 of 5)
(Continued from Part 4)
Vale to report 1Q15 earnings
Vale (VALE) will declare its first-quarter results on April 30, 2015, before markets open. A conference call will be held the same day at 11:00 am ET. Dial in: 1-866-262-4553. Pass code: VALE.
Fiscal 2014 results recap
Vale’s fiscal 2014 results were a miss on market expectations, particularly in terms of the costs of goods sold and other expenses incurred. Vale’s revenues totaled $38.2 billion in 2014, a decrease of 19.5% compared to 2013. Lower iron ore sales of $9.2 billion and lower pellets sale prices were principally responsible for these results.
Things to look forward to
Iron ore realized prices are expected to decline in 1Q15 compared to both 4Q14 as well as 1Q14. The iron ore price benchmark is down ~15% in 1Q15 over 4Q14.
The costs for iron ore, however, are expected to improve compared to 4Q14, as there were some one-off costs last quarter. Vale should also benefit from depreciation in real and lower freight costs caused by a fall in bunker costs.
Vale’s management is expected to provide an update on the progress of the Nacala corridor port, which was expected to begin in 1Q15, as well an update on Conçeicao Itabiritos II. This production line is expected to start sometime in 1H15. Management may also talk about the proposed base metals IPO (initial public offer)
Vale struck a gold stream agreement with Silver Wheaton (SLW) in March. Vale will sell SLW an additional 25% of the payable gold by-product stream from the Salobo copper mine, for the life of the mine.
Silver Wheaton (SLW) forms 4.6% of the Market Vectors Gold Miners ETF (GDX).
The market responded positively to this asset monetization move. There may be more such levers available for management to pull. Certainly, it would be interesting to learn about new developments.
BHP Billiton (BHP) and Rio Tinto (RIO) have also done deals like this in the past to improve their respective cash flow profiles. Together, these two companies form 28.5% of the iShares MSCI Global Metals & Mining Producers ETF (PICK).
The SPDR S&P Metals and Mining ETF (XME) provides diversified exposure to the metals and mining space.
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