Vale S.A.
VALE
reported iron ore production of around 82.5 million tons in the fourth quarter, down 2.4% year over year and 7.8% sequentially, primarily due to higher rainfall that restricted mining in deeper pits in Serra Norte, which is located in Vale’s northern system. The company’s total iron ore output was 315.6 million tons (Mt) for 2021, which was up 5.1% from prior-year levels. The company had earlier stated that it anticipates 2021 production to fall within the lower half of its earlier stated range of 315 Mt to 335 Mt. The company recorded higher production levels for coal and cobalt in 2021, while production of manganese, nickel and copper were down. Vale’s shares dipped 2% on these results as its performance in the fourth quarter and full-year lagged its peer
Rio Tinto Plc
’s
RIO
numbers.
The improvement in Vale’s iron ore production for the year was attributable to the resumption of Serra Leste operations in late 2020, the higher output of high silica products at Brucutu and improved performance in the Itabira complex. Timbopeba operating with six beneficiation lines since March 2021, the resumption of wet processing production in Fábrica, the production of high silica products and rising third-party purchases led to the higher output. However, weaker performance at S11D offset some of these gains.
Vale’s pellet production was 31.7 Mt in 2021, up 7% from 2020, courtesy of the resumption of the Vargem Grande pellet plant in January. However, production was partially impacted by lower pellet feed availability at Itabira and Brucutu.
The company ended 2021 with 340 Mt of production capacity. By the end of this year, Vale expects to achieve 370 Mtpy after the ramp-up of the tailings filtration plants at Itabira and Brucutu sites and their respective additions in tailings storage capacity during the second half of the year.
Copper production for the year was down 17.6% year over year to 296.8 kt in 2021 mainly due to the labor disruption in Sudbury. Manganese ore production was 350 kt in 2021, reflecting a 53% plunge from last year. Coal production was 8.5 Mt, implying a 45% year-over-year rise driven by an improved performance in the second half following the ramp-up after the plant’s revamp. On Dec 21, 2021, Vale announced that it has entered into a binding agreement to sell its coal assets in Mozambique, as part of its efforts to focus on its core businesses.
Production of nickel was down 8.5% year over year to 168 kt in 2021 on account of labor disruption at Sudbury and lower production from PTVI sourced ore due to reduced matte production rates as COVID-19 travel restrictions demanded the postponement of required furnace maintenance from 2021 to 2022.
A Peek at Q4 Production for Other Metals
Nickel production reached 48 kt in the fourth quarter of 2021, which surged 59% from the third quarter. However, compared with the fourth quarter of 2020, nickel production was down 5.5%. Copper production was 77.5 kt in the quarter, down 17% year over year but up 12% sequentially. Cobalt production reached 603 metric tons in the quarter under review, down 3.5% from the prior-year quarter but up 33.4% sequentially. Manganese ore production totaled 38 kt, which was down 68% year over year and 65% sequentially. Coal production came in at 2.8 Mt in the fourth quarter, up 129% from the prior-year quarter and 12.9% sequentially. Coal sales in the quarter totaled around 2.65 Kt, highlighting growth of 73% year over year and 0.4% sequentially. Gold production was down 26% year over year and 4% sequentially to 89,000 troy ounces in fourth-quarter 2021.
Guidance for 2022
Vale stated that operations in Minas Gerais, which had been affected by the heavy rains earlier this year, have since resumed operations. The company estimates the impact was approximately 2 Mt on production. Vale maintained its iron ore production guidance between 320 Mt and 335 Mt for 2022 as it already factors in the impact of rainfall.
For 2022, the company now expects to produce nickel in the range of 175 kt to 190 kt. Copper production in 2022 is projected in the band of 330 kt to 355 kt.
A Look at Rio Tinto’s Results
Last month, Rio Tinto reported that it produced 84.1 Mt of iron ore in the fourth quarter of 2021, taking the year’s total to 319.7 million tons (100% basis). This was 4% lower than the prior year primarily due to above-average rainfall in the first half of the year, cultural heritage management and delays in growth and brownfield mine replacement tie-in projects. Ongoing travel restrictions due to COVID-19 and a tight labor market in Western Australia impacted the company’s ability to access experienced contractors and particular skill sets.
Due to these headwinds, Rio Tinto had stated that its shipments for the year would be near the lower end of the range of its previous guidance of 325 Mt to 340 Mt in 2021. The company’s shipments in 2021 were 321.6 Mt, down 3% from 2020.
Price Performance
Image Source: Zacks Investment Research
Shares of Vale have gained 0.2% in a year compared with the
industry
’s growth of 0.3%.
Zacks Rank & Stocks to Consider
Vale currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the basic materials space include
Commercial Metals Company
CMC
and
Nutrien
NTR
, both sporting a Zacks Rank #1 (Strong Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here
.
Commercial Metals has a projected earnings growth rate of 62% for the current fiscal year. The Zacks Consensus Estimate for CMC’s current fiscal year earnings has been revised upward by 23% over the past 60 days.
Commercial Metals beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed once, the average surprise being 13.1%. CMC’s shares have surged around 61% in a year’s time.
Nutrien has an expected earnings growth rate of 56% for the current fiscal. The Zacks Consensus Estimate for NTR’s current-year earnings has moved up 13% in the past 60 days.
Nutrien beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed once, the average surprise being 73.5%. NTR has surged around 36% in a year.
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