Vale S.A VALE recently announced that it will resume operations at its Voisey’s Bay Mine in Labrador, Canada in early July and expects to reach full capacity by early August. The resumption of production comes following a period of three months of monitoring progress and events associated with the COVID-19 pandemic. In a separate development, Vale has also been allowed to reopen mines in its Itabira complex in Brazil that had been shut earlier due to the rising number of coronavirus cases.
Vale has partnered with a private testing lab to provide extensive PCR testing of all employees at the Voisey’s site in compliance with World Health Organization (WHO) protocols to test, remove, track and treat positive or suspicious cases. The testing will enable the early identification and tracing, thus aiding in stemming the spread of any potential cases. However, no cases of COVID-19 have been reported to date at the site. Vale has moved the mine from “care and maintenance” to “planned maintenance” that is a precursor to resumption of operations.
Operations at Vale’s open-pit mine and concentrator at Voisey’s Bay began in 2005. The mine produced 25,000 tons of copper concentrate and 35,400 tons of nickel in 2019. In July 2015, Vale launched the Voisey’s Bay Mine Expansion project to transition the mine from open pit to underground. Slated to be completed by 2022, the $1.7 billion expansion project is expected to increase the life of the mine to 2032.
Recently Vale also announced that it has received permission from Minas Gerais state labor inspectors to reopen mines in the Itabira complex. Earlier this month, Vale had been ordered to shut operations at the complex by a Brazilian labor court after 188 workers tested positive for coronavirus. Per the inspectors, the company’s measures taken to mitigate the threat from the virus and protect its workforce were sufficient to restart works at the complex. Notably, the three mines at Itabira churned around 36 million tons, or 12% of the company’s total iron-ore output last year.
Vale affirmed production guidance for fiscal 2020. Iron ore fines production guidance for 2020 is at 310-330 Mt and pellet production guidance is 35-40 Mt. The company anticipates producing nickel between 180 kt and 195 kt in 2020 and the guidance for copper production is 360-380 kt.
The impact of the coronavirus pandemic and the slowing global economy will impact Vale’s near-term performance. Nevertheless, the company strives to sustain margins by focusing on product line, improving productivity and cutting costs. It is likely to gain from investment in projects, lower debt, efforts to ramp up coal business and transforming base metals business and introducing more high-quality ore in the market. The resumption of these operations comes at an opportune time considering that iron ore prices and copper prices are on the rise. Iron-ore prices are currently trending above $100 per ton as the alarming spread of coronavirus in Brazil has triggered supply concerns while demand in China remains strong. Copper prices are also gaining on the signs of economic recovery in the United States and China.
Price Performance
Shares of the company have fallen 23.1% in a year compared with the industry’s decline of 21.8%.
Zacks Rank & Other Stocks to Consider
Vale currently sports a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some other top-ranked stocks in the Basic Materials sector are Agnico Eagle Mines Limited AEM, B2Gold Corp BTG and Gold Fields Limited GFI. While Agnico Eagle sports a Zacks Rank #1, B2Gold and Gold Fields carry a Zacks Rank #2 at present.
Agnico Eagle has an estimated earnings growth rate of 53.6% for the current year. The company’s shares have surged 20.6% in the past year.
B2Gold has an expected earnings growth rate of 221.4% for the ongoing year. Its shares have appreciated 80.7% in the past year.
Gold Fields has a projected earnings growth rate of 30.9% for 2020. The company’s shares have gained 47.8% in the past year.
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