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Vale CEO Says Brazil Royalties Settlement Won’t Exceed Provision

Vale SA, the world’s largest iron-ore producer, won’t pay more than the 1.41 billion reais ($682 million) already provisioned to settle a royalties dispute, Chief Executive Officer Murilo Ferreira said.

Rio de Janeiro-based Vale expects to announce the settlement with the Brazilian government in the coming weeks, Ferreira told reporters today in New York. The company, which as recently as April 17 said that it estimated the claims at about 5.64 billion reais, said Sept. 4 it was setting aside 1.41 billion reais to pay the overdue mining royalties.

“It will be below that level, it won’t exceed it,” Ferreira told reporters after a meeting with investors in New York. “It will be announced in the next few weeks.”

Vale has been fighting Brazilian tax claims as governments from Australia to Chile seek to boost revenue from metals and mineral mining. Separately, Brazil also says it’s owed about 30.7 billion reais in taxes tied to Vale’s profit from foreign units. Concern the payments would cause losses led Vale shares to slump 22 percent last year, the worst performance in three years.

Vale’s American depositary receipts fell 1.5 percent to $17.44 today.

Credit Suisse Group AG analysts led by Ivano Westin said in a report July 13 that the company may end up paying 1.2 billion reais in the dispute. Banco Santander SA’s Felipe Reis and Alex Sciacio estimated the final payment at about 4 billion reais, they said in an Aug. 16 research note.

The Brazilian Finance Ministry’s revenue service is claiming taxes on overseas profit from 1996 to 2008 in four separate disputes. The agency may file claims for the period starting in 2009, Vale said March 6.

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