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Vale to Book $4.2 Billion Charge for Nickel, Aluminum Assets

Vale SA (VALE5), the world’s largest iron- ore producer, said it will book a $4.2 billion fourth-quarter pretax charge after lowering the valuation of a nickel mine and its stake in aluminum producer Norsk Hydro ASA. (NHY)

Vale will take a $2.85 billion pretax writedown on its Brazilian nickel project Onca Puma after operations stopped and prices for the metal declined, the company said in a statement late yesterday. The Rio de Janeiro-based miner said it will also recognize a $1.3 billion pretax impairment on its 22 percent stake in Oslo-based Norsk Hydro.

“The downward volatility of aluminum prices and the macroeconomic uncertainties about the European economy have contributed to reduce the market value of our 22 percent stake,” Vale said. “Despite these charges, we remain confident on the long-term market fundamentals of the global nickel market.”

Chief Executive Officer Murilo Ferreira is selling assets, looking for partners and writing off unprofitable projects after shares slumped to the lowest in almost three years in September amid weaker demand from China and Europe. The company said Dec. 19 that it agreed to pay the equivalent of $553.1 million to settle Swiss and Brazilian tax disputes, of which about $451 million will be booked in the fourth quarter according to Bloomberg’s calculations.

Charges Anticipated

“While the charges should mean a loss for Vale in the fourth quarter, this was anticipated and is part of the company’s ongoing balance sheet clean-up, which we view as positive,” Banco BTG Pactual SA’s analysts led by Edmo Chagas said in a note to clients today.

Vale said the impairments, which won’t affect its cash position, will be treated as one-time charges on its 2012 financial statements, which are tentatively scheduled to be released Feb. 27. The company expects to complete its annual asset review by that date, it said.

Chief Financial Officer Luciano Siani said Dec. 6 that Vale will announce impairments in “two stages,” including a second writedown “of around $50 million to $100 million in several different assets” with the release of its 2012 results.

“Our intention is to clean up the balance sheet quite soon,” he said during a presentation to investors in London.

Vale also said yesterday that operations at Onca Puma, which were halted in June, will restart in the fourth quarter of 2013 after the company spends $188 million rebuilding one of the project’s furnaces.

Vale fell 0.8 percent to close at 40.50 reais in Sao Paulo. The stock has gained 7.1 percent this year.

To contact the reporter on this story: Juan Pablo Spinetto in Rio de Janeiro at jspinetto@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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