Market Overview

BMO Lowers Vale Estimates On Court-Ordered Mine Shutdowns

BMO Lowers Vale Estimates On Court-Ordered Mine Shutdowns

Vale SA (NYSE: VALE)'s Brucutu and Timbopeba mines have been shutdown by court order, leading BMO Capital Markets to lower its estimates for the company to reflect disruptions at both operations.

The Analyst

BMO Capital Markets’ Edward Sterck maintains a Market Perform rating and $13 price target on Vale.

The Thesis

Vale's 2019 iron ore production estimate has been reduced by another 30Mt to reflect the ongoing suspension of Brucutu as well as the more recently announced suspension of Timbopeba, Sterck said in a Monday note. 

Production at Brucutu was not expected to remain suspended for this long, but the company has been slow in the appeals process, the analyst said.

BMO now expects the mine to restart production in the fourth quarter, creating a negative impact of 23Mt on the 2019 production forecast, while the suspension of operations at Timbopeba impacts the forecast by another 8Mt.

Taking into account other announcements by Vale, the sell-side firm's estimate for production cuts has been raised from 33Mt to 35Mt for 2019 and from 33Mt to 37Mt for 2020, Sterck said. 

The analyst reduced the EPS estimates for 2019 and 2020 by 6 percent to $19.793 billion and by 1 percent to $18.817 billion, respectively. Consequently, the EPS estimates for the two years have been lowered to $2.10 and $1.97, respectively. 

Price Action

Vale shares were down 0.38 percent at $13.12 at the time of publication Monday. 

Related Links:

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RBC Lowers Vale Price Target After 'Enormous Tragedy' In Brazil, Anticipates $10B Liability 

Latest Ratings for VALE

May 2019UpgradesNeutralBuy
May 2019UpgradesUnderperformSector Perform
Mar 2019DowngradesOutperformSector Perform

View More Analyst Ratings for VALE
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Posted-In: BMO Capital Markets Edward SterckAnalyst Color Price Target Commodities Reiteration Markets Analyst Ratings Best of Benzinga


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