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Relations between Brazilian miner Vale and the government have improved, according to the head of one of the world’s top iron ore producers, in a boost for a group that relies on public authorities for important licences.
Chief executive Gustavo Pimenta highlighted the easing tensions with the administration of President Luiz Inácio Lula da Silva in comments that should help settle the nerves of some investors.
The leftwinger repeatedly criticised the $42bn-valued group last year over issues ranging from its investment levels and asset sales to executive pay and environmental accidents.
“There was a perception of difficulties in Vale’s relationship with the company’s various stakeholders, including — but not only — the government,” Pimenta told the Financial Times at the miner’s headquarters in Rio de Janeiro.
“I’ve dedicated a lot of my time to this institutional theme. I always say we have many more points of convergence than of divergence, and we’ve been able to show this,” he said.
Pimenta took charge in October, having been chief financial officer.
In addition to the president’s swipes at Vale, Lula’s government was also accused of interference in its CEO succession — claims Brasília denied.
Together the incidents rattled some investors fearful of political meddling in the group.
Vale was privatised in 1997 and officially the Brazilian state’s direct influence over the business is limited, although it retains golden shares granting veto powers over certain decisions, such as a change in name or the location of its headquarters.
However, the company depends on public authorities in Latin America’s largest economy for vital environmental permits and infrastructure concessions.
The reset between the company and government was on show when Lula posed in photos alongside Pimenta last month for the announcement of a R$70bn (US$12.2bn) investment over five years at Vale’s Carajás complex, home to the world’s largest open-pit iron ore mine, in the Amazonian state of Pará.
The CEO also highlighted Vale’s big bet on copper, with plans to double production over the next decade to 700,000 tonnes annually. It aims to gain greater exposure to a key mineral in the clean energy transition, which goes into wiring and motors.
“The thesis is the constant electrification of the world and reducing carbon footprints. This path is very favourable to copper, as it doesn’t have direct substitutes,” said Pimenta. “Our vision is to have a product portfolio that is resilient for a decarbonised future.”
Pimenta said the New York and São Paulo-listed group saw copper as more attractive than lithium, which is also important in the green energy switch. Lithium-ion batteries are used in electric vehicles and mobile phones.
“We looked at lithium, but we aren’t convinced of the long-term fundamentals compared to copper, for example. In our view, supply is less restricted,” he added.
Lithium prices have collapsed over the past two years amid a glut, weaker EV sales and worries about Chinese demand.
Expectations of future copper shortfalls meanwhile have triggered a race for assets producing the red metal, underscored by the failed £39bn takeover of Anglo American last year by BHP, the world’s largest miner by market capitalisation.
While the biggest copper miners produce about 1mn to 2mn tonnes annually, Pimenta said Vale’s target would “put us back in the game”.
No investment figure was disclosed, but the majority of projects will be in Brazil and Vale said there was potential to raise copper production by almost 40 per cent in the Carajás region alone by 2030. Pimenta said significant merger and acquisition activity was unlikely.
Shortly after Pimenta’s promotion, Vale and BHP finalised a R$132bn settlement with Brazilian authorities over the 2015 Mariana disaster.
The collapse of a mining waste dam at an iron ore venture jointly owned by the two companies killed 19 people and caused extensive environmental damage. A separate civil trial over the accident is taking place in London.
