Vale (NYSE:VALE) Falls Short Of Previous Iron Ore Guidance For 2020

Vale (NYSE:VALE) has announced that it is expecting to produce 300-305 million iron ore tonnes in 2020, missing its previously lowered projection of around 310 million tonnes. In 2021, the company expects annual production to be between 315 and 335 million iron ore tonnes.

Vale lowers 2021 iron ore production guidance

In a research note to Reuters, Bradesco BBI investment bank analysts said that the 2021 guidance is frustrating. This is because the management had previously stated that 2021 iron ore production would start at 318 million tonnes. It is important to note that before the Brumadinho dam collapse in 2018, the company had produced around 385 million tonnes.

The mining company also indicated that it would set aside another $670 million in its Q4 2020 earnings to improve its dams’ safety. With this commitment, the company’s total provision for improving dam safety will increase to $2.7 billion.

Last week, Vale announced that the northern state of Para’s environment authorities had approved the resumption of activities at the Serra Leste mine. Most importantly, the expansion will include refurbishment of an iron ore mill expected to deliver the mine’s processing capacity to ten million tonnes annually by 2023.

Vale expects its copper production to rise from 390,000 in 2021 to almost 500,000 tonnes by 2025 averaging around 455,000 tonnes for the four years. Vales said that over the next three years, nickel production could average around 200,000 tonnes.

Vale constructing solar energy project

The company has plans to transition to carbon-neutral mining. As a result, the company announced a 766MW solar power generation project in Minas Gerais, Brazil, as part of carbon neutrality efforts. The $500 million project will see the company construct a photovoltaic plant that includes 17 sub-parks. It will comprise a transmission line, connection bay, and elevator substation with contracts already signed for connection to the Brazilian national Interconnected System.

The plant will commence operations in Q4 2020 and generate around 193MW annually, which will be around 13% of the company’s projected demand by 2025.