Buffet Radar: Buy Vale SA (VALE)
The shares of Vale, one of the world's leading producers of iron ore and nickel, with operations primarily centered in Brazil, have increased by roughly 32% in the last 6 months. The company's major product, iron ore, which will generate more than two-thirds of its income in 2021, is what has propelled the recent advances.
After discussions with parties, including automakers and sovereign wealth funds, Vale's CEO revealed that the company had received many bids for a stake in its base metals business. He also claimed that the division might grow to be "even greater" than the Brazilian mining company. Bartolomeo stated without going into further detail that Vale is also in talks about adding an automaker to its board. Vale, the largest publicly traded business in Latin America with a market capitalization of $79 billion, generates 80% of its revenue from iron ore.
Source: Yahoo Finance
$VALE had said it would have a partner for investment by the beginning of December, but the timetable has slipped, and the transaction is now anticipated for the first half of this year. Since the new investor won't be a mining firm, competitors like BHP or Rio Tinto, which are also looking to diversify away from iron ore, the primary steel component, are outrunning.
The new investment agreement might include an offtake agreement in which Vale provides metals on a long-term basis. For example, Ford and Tesla already have contracts with Vale to supply nickel for batteries.
For iron ore producers like Vale, the ongoing fall in EU steel production may appear to be a net negative, but it helps maintain higher global steel prices, which raises iron prices. Given the positive economic indicators, strong profitability, and alluring value, VALE stock is a buy with substantial upside potential.