VALE Vale SA

By Paul Kiernan 

RIO DE JANEIRO -- Brazilian mining giant Vale SA said Friday its chief executive plans to step down when his term ends in May, amid reports of pressure to replace him with a political appointee.

Vale CEO Murilo Ferreira will not renew his contract when it expires on May 26, after five years on the job, the company said in a press release. No reason was given for the decision.

Multiple Brazilian news sources have reported in recent weeks that conservative Sen. Aécio Neves has been maneuvering in Brasília, the capital, to replace Mr. Ferreira with a candidate of his choosing. Politicians in Brazil often use high-level appointments as bargaining chips, and Mr. Neves's PSDB party is a key ally in President Michel Temer's governing coalition.

According to financial newspaper Valor Econômico, the private members of Vale's controlling group wanted Mr. Ferreira to stay on as CEO.

While Vale is not outright controlled by the state and generally operates like a private company, the Brazilian government controls a substantial portion of its voting shares via state-run pension funds and other entities, and has managed to shake up the company's management in the past. Mr. Ferreira was installed in 2011 at the behest of former President Dilma Rousseff.

A spokeswoman for Mr. Neves didn't immediately respond to a request for comment. Vale's shares recently traded down 2.2% at 30.94 Brazilian reais ($10.01).

During his stint as CEO, Mr. Ferreira guided the company through repeated crises, from a nearly 80% drop in the price of iron ore to a catastrophic dam failure at Vale's Samarco joint venture that killed 19 people. He also successfully reduced costs by slashing non-core projects from the company's investment portfolio, and oversaw the final stages of a landmark iron-ore project known as S11D.

"During his term, Vale became a leaner and more agile company, significantly increasing its operational competitiveness and maintaining a healthy level of debt," the company said in the press release.

Mr. Ferreira's efforts to make Vale more globally competitive stirred discontent in his home state of Minas Gerais, which Mr. Neves represents in Brazil's Senate. Centuries of intensive mining there by Vale and others have depleted the state's ore reserves and left some operations vulnerable to commodity downturns.

S11D, located in the northern state of Pará, is seen by some as a hedge against Minas Gerais's decline. Built at a cost of $14 billion, it will increase Vale's production capacity by 25%, churning out the 90 million metric tons per year of the highest-quality, lowest-cost iron ore in the world.

Write to Paul Kiernan at paul.kiernan@wsj.com

(END) Dow Jones Newswires

February 24, 2017 09:34 ET (14:34 GMT)

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