Vale Steps Up Divestments as Brazil Tax Deadline Looms

Vale SA, the largest iron-ore exporter, agreed to its second asset divestment this week, bringing this year’s total sales to at least $3 billion, as a deadline to settle a tax dispute with Brazil approaches.

Vale signed an agreement to sell 20 percent stakes in two natural gas exploration blocks in Brazil’s Parnaiba basin to GDF Suez SA, the French supplier said in a statement today, without disclosing the accord’s value. That follows Vale’s divestment this week of a stake in aluminum maker Norsk Hydro ASA for $1.82 billion.

The miner based in Rio de Janeiro is selling lower return assets, putting projects on hold and focusing on its more profitable iron-ore unit in a bid to boost profit margins and regain investors’ confidence after shares fell to a four-year low in July. In September, it sold stakes in a cargo unit for about 2.7 billion reais ($1.2 billion) to Japan’s Mitsui & Co. and a Brazilian government fund.

“It may be getting ready for the tax claim settlement,” Rodrigo Garcilazo, an equity analyst at GBM Grupo Bursatil Mexicano SA, said by telephone from Santiago, Chile. “The timing so close to the deadline doesn’t seem to be a coincidence.”

While Vale had previously indicated the divestment of the Norsk Hydro stake and oil and gas assets, the announcement is attracting attention before the Nov. 29 Brazil tax settlement deadline on a 30.5 billion-real dispute, Garcilazo said.

Cargo Stakes

Vale is in exclusive talks with Canada’s Brookfield Asset Management Inc. to sell an additional 26 percent of the cargo unit, known as VLI, which may generate about 2 billion reais if the accord is completed on terms similar to the sale to Mitsui. That would bring Vale’s divestments in 2013 to at least $3.8 billion, more than double last year’s $1.47 billion of sales, which included a coal mine in Colombia and 10 large vessels.

Vale has enough time to make a decision on the possible tax settlement before the deadline, Chief Executive Officer Murilo Ferreira told reporters on Nov. 7, when he also said the company expects to conclude the VLI sale stake to Brookfield before year-end. The company confirmed the sale of the gas blocks to GDF in a statement to Bloomberg News today, without providing details. GDF Suez, based in Courbevoie, France, didn’t reply to an e-mail seeking comment on the value of today’s accord.

Separately, Vale also said today it completed the sale of all of its 22 percent stake in Norsk Hydro after an over-allotment option of 40.7 million shares in the Oslo-based firm was exercised at 25 kroner ($4.04) each. The company on Nov. 12 sold 407.1 million shares of Norsk Hydro for the same price.

Vale rose 1.1 percent to close at 32.40 reais in Sao Paulo. GDF Suez lost 0.5 percent to 18.535 euros in Paris. Norsk Hydro closed little changed at 25.66 kroner in Oslo.

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