Miner promises investors ‘Louis Vuitton’ of iron

BRAZILIAN mining giant Vale is hoping a sweeping overhaul of its corporate governance will tempt more Uk-based funds to buy into its stock.

The company, which is the world’s largest miner by tons produced, is wooing investors with a plan to rationalise all its stock into one class, a move it says will end the dominance of its majority shareholder, a consortium dominated by Brazilian pension funds.

“We already have important, knowledgeable mining and metals investors in London, but we feel we can broaden and have a larger investor base, and maybe also larger holdings from the same investors,” Luciano Siani Pires, the firm’s chief financial officer, told The Daily Telegraph.

Around 60pc of Vale’s capital is held abroad, with 15-20pc of that in the UK. Despite this, and its status as the world’s biggest miner of iron ore, used in steel, Vale often went “unnoticed” in the London market, Mr Siani said. He acknowledged that the company’s ownership structure and closeness to the Brazilian government had often put investors off. “We’re very mindful that Vale trades at a discount to its peers and governance is one of the issues,” he added.

Vale’s restructuring comes 20 years after the mining giant was privatised. Under the plan, majority shareholder Valepar will be unwound and two independent directors will be appointed to the miner’s board. By 2020, no single shareholder will be able to hold more than 25pc of the stock, although the Brazilian government will retain a “golden share” that will enable it to fend off foreign takeovers.

Mr Siani, who visited investors in London and Europe last week to provide more detail on the plans, said UK investors in Vale, which has a market cap of £36.3bn, would gain exposure to the “Louis Vuitton of iron ore” because of the high quality of its metal. He added that, despite “tumultuous times” in Brazil, where the economy has entered a recession and the president is facing corruption charges, the miner could be “an example of the Brazil that works and functions”.

Vale is currently ramping up production from its vast new S11D mine, which some analysts have warned could flood the market with iron ore.