Brazil's Vale output goals lag forecasts, sets emission targets

SAO PAULO (Reuters) - Brazilian miner Vale on Wednesday unveiled iron ore production targets that lagged previous forecasts while underlining its efforts to pay reparations related to a dam disaster and lower carbon emissions in the coming years.

FILE PHOTO: The logo of Vale SA is pictured in Rio de Janeiro, Brazil, August 7, 2017. REUTERS/Ricardo Moraes/File Photo

Vale’s new forecast output of 300 million to 305 million tonnes of iron ore this year, disclosed as part of its investor day presentation, falls short of a previous 2020 target of at least 310 million.

Some analysts said they were also disappointed with forecast production for 2021 in the range of 315 million to 335 million tonnes, which Vale’s head of ferrous metals, Marcello Spinelli, said took into account expected rainy conditions, maintenance and other operational risks.

“We think the 2021 guidance of 315-335 mt is particularly frustrating, especially considering management has recently stated the starting point for 2021 is 318 mt,” analysts at Bradesco BBI investment bank said in a research note.

Vale shares, which have surged 57% this year, were down 2.1% in afternoon trading on the Sao Paulo stock exchange.

“We can have some upside here but we also prefer to be more conservative,” Spinelli said during a presentation that also emphasized efforts to phase out risky tailings dams after the deadly disaster at Brumadinho, which killed more than 270 people.

Iron ore prices, which had already jumped to multiyear highs overnight, gained further after the output numbers were disclosed.

“We have a great price, so we need to do the volumes,” Spinelli said.

Since Brumadinho, the miner has sought to restore production at some older mines in southeastern Brazil while focusing on expanding more efficient ones in the north.

It has also made environmental and worker safety a mantra, seeking to lure back investors concerned about the environment and social issues, an effort which has also included carbon emission reductions.

On Wednesday, Vale for the first time set a target for reducing by 15% its “Scope 3” net emissions, covering not only its carbon footprint but those of its customers, by 2035.

The company hopes to strike partnerships with customers who will pledge to lower emissions and as part of that bid, aims to raise the percentage of high-quality products in its portfolio to 90% by 2024.

The company plans to set aside an additional $670 million from its fourth-quarter earnings to improve dam safety, bringing total provisions for that purpose to $2.7 billion.

Talks on a global agreement on Brumadinho with authorities in Minas Gerais state remain “complex,” Vale Chief Executive Eduardo Bartolomeo said, while Chief Financial Officer Luciano Siani said the company had earmarked 19 billion reais ($3.63 billion) for the settlement, so the final agreement “need to be in this ballpark.”

Even so, the company is optimistic about paying shareholders an extraordinary dividend next year, Siani said.

Reporting by Roberto Samora and Christian Plumb; Writing by Brad Haynes; Additional reporting by Paula Laier; Editing by Brad Haynes, Emelia Sithole-Matarise and Lisa Shumaker