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An acquisition in aluminium: Vale of the trolls

May 10, 2010

“A deal with Norway marks a change of course for a Brazilian mining giant … For Vale, ridding itself of its aluminium business, its third-biggest source of revenue after iron ore and coal, marks a significant change of course. Its purchase of Inco, a Canadian nickel miner, in 2006 and its failed attempts in 2008 to take over Xstrata, another big competitor, indicated that Vale’s strategy was to become a diversified global mining giant like Rio Tinto and BHP Billiton. But now, as Jordi Dominguez, an analyst at HSBC, puts it, the Brazilian company is ‘de-diversifying’.”

Source: The Economist, May 6 2010


  • Vale has done a significant investment in the iron ore business and in the same week as sold its aluminium business.
  • HSBC and the Economist interpret these transactions as a significant change of course for the company. Where the company has been trying to diversify in the previous years, the Economist suggests Vale will focus more on the iron ore business.
  • The reason Vale has given for their ‘portfolio restructuring’ is the uncertainty of cheap energy supply in Brasil, which is crucial for a sustainable profitability of the aluminium business.


  • One of the key messages of Vale’s latest investor presentation was that it would invest more in fertilizer nutrients. One of the major projects coming on steam is the Tres Valles copper project. These signs cannot really be explained as “de-diversification”.
  • HSBC and the Economist are likely to have drawn their conclusions too rapidly. Vale has reduced the risk in an important part of its business in a sound deal, at the same time reducing its dependency from the Brazilian government.