Brazil's Vale Doesn't Foresee New Debt Issuance This Year

   By Paul Kiernan 
 

RIO DE JANEIRO--Brazilian mining giant Vale SA doesn't expect to tap local or foreign debt markets again this year and would likely use any spare cash to increase dividends, company executives said Thursday.

Vale, which issued 1 billion Brazilian reais in debentures earlier this month to finance the ongoing expansion of its railroads in northern Brazil, expects to generate "very healthy" cash flow this year and already has limited short-term debts, Chief Executive Murilo Ferreira said in a conference call.

Vale posted its biggest net loss on record in the fourth quarter, due in part to a nearly $10 billion settlement with Brazilian tax authorities. Ratings agency Standard & Poor's revised its outlook on the company's debt to negative from stable, saying the tax agreement would likely add to Vale's overall debt burden.

"From that perspective, it would be advisable to have a downward-trending debt in order to reassure the current credit ratings," Chief Financial Officer Luciano Siani, while adding that Vale's debt levels are "very comfortable."

"I would say the bias would be to use excess cash more to pay dividends than to pay down debt, although some reduction would be desirable," Mr. Siani said.

Executives also said their plans to reach agreements by mid-2014 with potential partners in Vale's coal business and its multibillion dollar railway and port corridor in Mozambique are on track.

Regarding Carnalita, a potential potash project in the northeastern state of Sergipe that has been threatened by a local political feud, Mr. Ferreira said Vale has no plans to present the venture to its board of directors and is considering selling it.

Mr. Ferreira said he attended a meeting at Brazil's Senate to discuss the matter with Sergipe's governor, senators and the mayors of the two towns--Capela and Japaratuba--where Carnalita's potash deposit lies.

"Frankly I don't even expect [progress] because the mayor of Capela was so aggressive with his counterparts at the Senate meeting that I consider it improbable that they've arrived at an agreement," Mr. Ferreira said. "At this time we have no visibility."

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