Fitch: Vale’s cash flow marginally affected by Covid-19

Monday, 15 June 2020 23:21:43 (GMT+3)   |   Sao Paulo

Vale’s cash flow should be marginally affected by lower iron ore output due to rising Covid-19 infections, credit ratings agency Fitch said in a report this week. Fitch said higher iron ore prices should help companies like Vale and other global mining companies offset declined production.

Over 10 percent of Vale’s iron ore output was impacted last week after a court halted operations at the company’s Itabira complex due to employees testing positive for coronavirus.

“Material Environmental, Social and Governance (ESG) shortcomings, particularly in the areas of executing strategy and maintaining the well-being of employees, constrain Vale’s ‘BBB-’ credit ratings with a Stable Outlook. However, Vale is a low-cost producer with a leading market position, abundant reserves, and high-grade iron that commands a market premium, which reduces credit implications,” the Fitch report said.

Fitch estimated Vale could generate over USD 14 billion in EBITDA in 2020, assuming average iron ore prices of USD 75/dmt (dry metric ton).

Fitch said Anglo American’s Minas-Rio project in Brazil is also “unlikely to (see) any cash flow downside for the earnings outlook from a temporary disruption, if it occurs at Minas-Rio, to the existing rating case,” the agency forecasted.

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