Vale's net debt will not exceed $10 billion

Strong operating cash flow in 2021 will allow Vale (BBB- / Baa3 / BBB) to finance the remaining $ 6 billion in reparations, higher capital expenditures and shareholder benefits. High prices for iron ore and production growth will allow the company to exceed $ 37 billion in EBITDA by the end of 2021, up from $ 22 billion in 2020. In our opinion, the company's net debt should remain at the level of $ 10bn, as at current prices for the main groups of metals, Vale generates strong cash and timely fulfills obligations in full, as well as rewards shareholders.

Vale paid $ 4.6 billion related to the situation in Brumadinho, so the company remains to compensate for another $ 6 billion. The future annual expenses are quite comfortable for the debt profile - $ 2.4 billion in 2021 is the largest, and the payments themselves on obligations are smoothly distributed until the end of 2029 of the year.

Vale received $ 7 billion in adjusted cash from operating activities in the first quarter, the highest since Q2 2011. The company's spending will increase in 2021, but it will be manageable given high iron ore prices and Vale's $ 14 billion cash balance. Capital expenditures will increase 31% to $ 5.8 billion, and Vale began a share buyback in April worth $ 5 billion. Expected reparations of $ 2.4 billion will be lower compared to 2020. The company's credit profile looks solid. Among the issuer's Eurobonds, we single out the issue maturing in July 2030 (US91911TAQ67). The paper offers a yield of 2.8% per annum with a duration of 7.5 years.

Brazilian mining company Vale is the world's top producer of metals such as iron ore, iron ore pellets, and nickel, the key raw materials for steelmaking and stainless steel. Its Cajarás mine in Northern Brazil boasts the highest grade iron ore anywhere in the world. With greenfield mineral exploration in five countries, Rio de Janeiro-based Vale maintains a network integrating its mines with railroads, ports, and ships. Additionally, it has a sustainable energy project in Brazil, hydroelectric plants in Brazil, Canada and Indonesia, and pursues investments in energy and steel businesses through affiliates and joint ventures. About half of its revenue comes from China.