By Paul Kiernan
RIO DE JANEIRO--Brazilian mining giant Vale SA doesn't expect to
tap local or foreign debt markets again this year and would likely
use any spare cash to increase dividends, company executives said
Thursday.
Vale, which issued 1 billion Brazilian reais in debentures
earlier this month to finance the ongoing expansion of its
railroads in northern Brazil, expects to generate "very healthy"
cash flow this year and already has limited short-term debts, Chief
Executive Murilo Ferreira said in a conference call.
Vale posted its biggest net loss on record in the fourth
quarter, due in part to a nearly $10 billion settlement with
Brazilian tax authorities. Ratings agency Standard & Poor's
revised its outlook on the company's debt to negative from stable,
saying the tax agreement would likely add to Vale's overall debt
burden.
"From that perspective, it would be advisable to have a
downward-trending debt in order to reassure the current credit
ratings," Chief Financial Officer Luciano Siani, while adding that
Vale's debt levels are "very comfortable."
"I would say the bias would be to use excess cash more to pay
dividends than to pay down debt, although some reduction would be
desirable," Mr. Siani said.
Executives also said their plans to reach agreements by mid-2014
with potential partners in Vale's coal business and its
multibillion dollar railway and port corridor in Mozambique are on
track.
Regarding Carnalita, a potential potash project in the
northeastern state of Sergipe that has been threatened by a local
political feud, Mr. Ferreira said Vale has no plans to present the
venture to its board of directors and is considering selling
it.
Mr. Ferreira said he attended a meeting at Brazil's Senate to
discuss the matter with Sergipe's governor, senators and the mayors
of the two towns--Capela and Japaratuba--where Carnalita's potash
deposit lies.
"Frankly I don't even expect [progress] because the mayor of
Capela was so aggressive with his counterparts at the Senate
meeting that I consider it improbable that they've arrived at an
agreement," Mr. Ferreira said. "At this time we have no
visibility."
Write to Paul Kiernan at paul.kiernan@wsj.com
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