Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Brazilian iron ore miner Vale SA’s quarterly net income jumped by 47 percent but still badly missed analyst estimates, depressed by rising costs and foreign exchange related losses.
In a securities filing on Tuesday, the world’s largest iron ore producer said net income totaled $771 million in the quarter, well below a consensus estimate of $2.537 billion but still above the $525 million in profit during the same period last year.
Costs rose 11 per cent to $6.260 billion, while net operating revenue slipped 1 percent to $9.167 billion.
Vale said a loss of $1.287 billion from its financial operations was due to non-cash exchange rate variations, losses on currency derivatives and other instruments, mainly stemming from a 4.2 per cent depreciation in the real currency in the quarter.
That compares to a financial loss of $603 million in the fourth quarter of 2016.
However, cash flow increased to $2.744 billion in the quarter, helping Vale to cut net debt by a robust 14 percent on a sequential basis to $18.143 billion.
Vale has said it expects to slash debt to $10 billion by mid-2018.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) fell 13 percent to $4.109 billion, still exceeding a consensus estimate of $3.865 billion compiled by Thomson Reuters.
Reporting by Alexandra Alper Editing by Christian Plumb and Tom Brown.
