What Are The Key Sources Of Revenue For Vale?

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Vale (NYSE: VALE), one of the world’s largest mining companies, primarily operates in Brazil and has operations in 32 other countries. The company is the world leader in iron ore and iron ore pellet  production and has access to the world’s largest nickel reserves. Apart from iron ore and nickel, it also produces copper, coal, and other base metals. Vale also operates a large logistics network in Brazil that includes railroad, maritime terminals, and a port.

We have a price estimate of $14 per share for the company. View our interactive dashboard – Key Revenue Sources For Vale – and modify the key drivers to visualize the impact on the company’s revenue and valuation.

Vale has reported higher volume for iron ore in the first half of 2018, largely driven by higher production in the company’s S11D mine. In fact, the company was able to achieve record volume output in the second quarter, despite a nationwide strike. Further, Vale’s revenue growth in the last quarter was driven by higher iron ore prices as a result of strong Chinese demand. Accordingly, we expect $34 billion in revenues from the company in 2018. Below, we discuss key sources of revenue for Vale.

Bulk Materials and Other Products Revenue (80%) – Vale operates four systems in Brazil for producing and distributing iron ore – Northern, Southern, Southeastern, and Midwestern systems. The company conducts mining operations in the Midwestern System through Samarco Mineração S.A, a joint venture between Vale and BHP Billiton, in which the company has a 50% equity stake. Further, Vale has benefited from higher iron ore prices, which are expected to remain higher through the second half of the year as China’s winter restrictions resume. According to our estimates, we expect $27.3 billion in revenues from this division in 2018.

Base Metals Revenue (20%) – Vale’s mining operations of nickel are located in Brazil, Canada, and Indonesia. The company operates integrated mining, milling, smelting, and refining operations to process ore into finished nickel.

  • The company’s nickel production stood at 288,200 tons in 2017. We expect 268,000 tons shipments in 2018, converting into $2.9 billion in revenues from nickel in 2018.
  • Further, Vale’s copper mining operations are conducted at its Sossego and Salobo mines in Brazil. The company also produces copper as a by-product of its nickel production operations in Canada. The company’s copper production stood at 438,500 tons in 2017. We expect 411,000 tons in shipments of copper in 2018, with an average price of $5,305 per ton, translating into $2.2 billion in revenues for the year.
  • Additionally, the base metals division also incorporates the sale of by-products of the company’s base metal mining operations including precious metals such as gold, silver, platinum, and palladium, and cobalt. We expect $1.6 billion in revenues from the sale of these products, totaling $6.7 billion in revenues from base metals division.

 

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