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Vale (VALE) Shares Up on Record Q1 Iron-Ore Production

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Premium mining company, Vale S.A.’s (VALE - Free Report) aggregate iron-ore output touched a record high in first-quarter 2017. Shares of this Zacks Rank #3 (Hold) stock climbed in the pre-market trade on Nasdaq, clearly reflecting an optimistic reaction to the release.

Inside the Headlines

The company’s first-quarter iron-ore output came in at 86.2 million tons (Mt), up 11.2% year over year. The upside was stemmed by robust ramp-up of the company’s S11D mine and Itabiritos projects conducted in the Southeastern System.

Aggregate output of pellets totaled 12.4 Mt, up 8.2% year over year. The upside was driven by solid productivity attained from both the systems in Brazil as well as the absence of one-month maintenance closure of the Oman plant in Jan 2016.  

Gross output of coal was 2.4 Mt, up 46.4% year over year. This remarkable upside was backed by record productivity of the company’s Moatize mine.

However, during the reported quarter, aggregate productivity of manganese ore, nickel, copper, cobalt and gold fell short of the year-ago tallies by 8.7%, 2.9%, 2.6%, 10.1% and 11%, respectively. Lesser availability of good quality ores, weaker-than-expected mining productivity and planned maintenance shutdown of certain mines were some factors playing spoilsport.  

Our Take

Iron-ore prices tumbled to a six-month low (around $63/ton) in the third week of Apr 2017. The downside was stemmed by a supply glut in the market, anticipation of lower Chinese steel demand and concerns relating to Donald Trump’s overnight announcement to examine foreign steel imports in the U.S. Fall in iron-ore prices is bad news for mining giants like Vale, BHP Billiton Limited (BHP - Free Report) , Rio Tinto plc (RIO - Free Report) and Cliffs Natural Resources Inc. (CLF - Free Report) , as this core metals are a key profitability source for these companies.

Over the last one month, Vale’s shares recorded a loss of 6.72%, narrower than 11.30% loss incurred by the Zacks categorized Mining - Iron industry. Though shares of the company tanked, it managed to outperform the industry based on some solid fundamentals.

This Zacks Rank #3 stock is poised to grow on the back of asset portfolio solidification, greater innovations, lower costs, increased productivity and superior operations. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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