Vale sinks to lowest market value since 2016 – Citibank

The stock market value of base metals giant Vale (NYSE: VALE) has fallen to its lowest since 2016 on investor concerns over iron ore and nickel as well as uncertainties surrounding Brazil and China, analysts at Citibank say. 

Shares in Vale have dropped 2.7% this year in New York to US$8.56 apiece on Wednesday, valuing the company at US$38.3 billion. Over the past 12 months, the company’s shares have plunged 44%. Vale’s shares in Brazil fell by more than 23% in 2024, marking their worst annual return since 2015.

Lat month, Vale announced job cuts across its global operations to remain competitive. In a statement, the company said that “people in non-operating roles” would be leaving as the mining giant transitions to a “new decentralized structure.”

However, the bank maintains that Vale’s dividends provide enough value to justify the investment.

“At first glance, the market value below US$40 billion appears undervalued compared to the 10-year average,” the analysts say, before reiterating a buy recommendation. The price target for American Depositary Receipts (ADRs) was reduced to US$12 from US$15, still leaving a 39% gain potential.

Iron ore

Citi estimates earnings before interest, taxes, depreciation and amortization of US$13.8 billion for Vale this year based on an iron ore price of US$95 per ton. The bank said the commodity may exceed the market’s more pessimistic expectations this year, enabling a dividend yield of 9%.

“We continue to recommend buying iron ore assets, which we view as undervalued by the market. Iron ore has been, by far, the biggest cash cow for the global mining industry over the past 50 years,” Citibank said. “Low-price periods are painful but ultimately lead to a reconsolidated supply.”

Vale’s shares were trading at $8.65 on Tuesday morning in New York, giving the company a market cap of $37.1 billion, compared to $123 billion for BHP (NYSE: BHP) and $94.1 billion for Rio Tinto (NYSE: RIO).

Forecasts

Vale aims to produce between 325 million and 335 million tonnes of iron ore this yer, up from about 328 million tonnes in 2024. From 2030, the miner forecasts annual output of more than 360 million tonnes. It’s also planning to increase mining from tailings to 10% of its total within five years. 

Iron ore futures hit seven-week lows on Tuesday, weighed down by rising inventories of the steelmaking ingredient and disappointment over a lack of additional monetary stimulus in China. 

On Wednesday, the most-traded iron ore contract on China’s Dalian Exchange (May 2025) decreased 0.3% to 751 yuan per tonne, about US$105 per tonne, according to BMO Capital Markets. During Tuesday’s session, the contract fell to its weakest level since Nov. 19, at 745.5 yuan.