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Vale trims iron ore guidance, again

Brazil miner Vale SA (BZ: VALE3) has further trimmed its 2019 iron ore and pellets sales guidance and slashed its copper outlook.
Vale trims iron ore guidance, again Vale trims iron ore guidance, again Vale trims iron ore guidance, again Vale trims iron ore guidance, again Vale trims iron ore guidance, again

Vale has reduced its iron ore and pellets sales guidance

Staff reporter

The company had forecast iron ore sales of 307-332 million tonnes following the fatal Brumadinho tailings dam disaster in Minas Gerais state in January. 

It had outlined iron ore production guidance of 400Mt for 2019, at its Vale Day presentation in London last December.

The company then warned last month the Itabiruçu stoppage and revision of its sales plan meant iron ore and pellet sales were expected to be "between the lower and the midpoint of the [307-332Mt] range".

Yesterday it trimmed this further to 307-312Mt, "given more visibility on sales expected for 4Q19, which should range between 83 - 88Mt".

It said production and sales in the first quarter of 2020 were expected to range between 70-75Mt due to seasonality, the gradual and safe return of operations and in line with its margin over volume strategy.

Copper guidance cut

Vale also said its 2019 copper production guidance had been reduced to 382,000-386,000t, mainly due to an unscheduled stoppage maintenance at the conveyor belt and the sag mill of its Sossego operation.

It was expected to resume production by mid-December, Vale said.

Vale's copper guidance had been estimated at 407,000-417,000t in May.

BMO analyst Edward Sterck said Vale's first quarter 2020 iron ore guidance was "quite a bit lower" than anticipated.

However he said given the copper division's "serial underperformance" that guidance cut was not unexpected.

"As we have previously highlighted, the base metals business has a history of missing expectations, typically coming in 5% below the start of year guidance on average over the past four years," he said in a note.

He pointed out Vale was yet to provide firm guidance for 2020.

BMO has a price target of US$12 for Vale's NYSE-listed equity, which closed yesterday at $11.61, down about 12% year-to-date.