Vale steps up divestments as Brazil dispute deadline nears

Vale SA, the largest iron-ore exporter, agreed to its second asset divestment this week, bringing this year’s total sales to at least US$3-billion, as a deadline to settle a tax dispute with Brazil approaches.

Vale has signed an agreement to sell 20% stakes in two natural gas exploration blocks in Brazil’s Parnaiba basin to GDF Suez SA, the French sup- plier said Thursday, without disclosing the accord’s value. That follows Vale’s divestment this week of a stake in aluminum maker Norsk Hydro ASA for US$1.82-billion.

The miner, based in Rio de Janeiro, is selling lower-return assets, putting projects on hold and focusing on its more profitable iron-ore unit in a bid to boost profit margins and regain investors’ confidence after shares fell to a four-year low in July. In September, it sold stakes in a cargo unit for about 2.7 billion reals ($1.2-billion) to Japan’s Mitsui & Co. and a Brazilian government fund.

“It may be getting ready for the tax claim settlement,” Rodrigo Garcilazo, an equity analyst at GBM Grupo Bursatil Mexicano SA, said from Santiago, Chile. “The timing so close to the deadline doesn’t seem to be a coincidence.”

Vale is in exclusive talks with Toronto-based Brookfield Asset Management Inc. to sell an additional 26% of the cargo unit, known as VLI, which may generate about two billion reals.