Vale has announced a capital expenditures (capex) budget of $10.2 billion for 2015, including $6.4 billion for project execution and $3.8 billion to sustain existing operations. The budget was announced in conjunction with a “Vale Day” at the New York Stock Exchange on December 2. The company also acknowledged that it is studying a partial demerger of its base metal assets, especially nickel assets it acquired from Inco in 2006, but said more study is needed before a plan goes to the Vale board of directors for a final decision.
Vale is lowering its capex spending for the fourth consecutive year in 2015. Over the past four years, its annual capex totals have been $16.3 billion in 2011, $16.2 billion in 2012, $14.2 billion in 2013, and $12 billion in 2014. The company anticipates ongoing reductions in capex through 2018, when it estimates the annual total will be about $5 billion.
Iron ore growth initiatives account for 71% of Vale’s planned 2015 project execution spending. These initiatives include expansion of its integrated iron ore operations in the Carajás region of Brazil ($3.7 billion) and completion of itabirites projects for the partial replacement of capacity, increase in production, and quality improvement in iron ore production from its southern and southeastern systems ($660 million).
Vale is currently estimating that its iron ore production will increase from 340 million metric tons (mt) in 2015 to 459 million mt in 2019. Production estimates for other mined products in 2015 are: 44.4 million mt of iron ore pellets, 10.6 million mt of coal, 303,000 mt of nickel, 449,000 mt of copper, 476,000 mt of potash, and 8.5 million mt of phosphate rock.
Regarding a possible demerger of some of its base metal assets, Vale CEO Murilo Ferreira emphasized that such a demerger is under study but that no plan is yet in place and that a final decision would have to be approved by Vale’s board of directors. Such a decision might be forthcoming during the first half of 2015, and, if it occurs, might include 30% to 40% of Vale’s base metal assets by value in an initial public offering for listing on the Toronto Stock Exchange.