1. Vale S.A. (NYSE:VALE)
Upside Potential: 63.31%
Iron ore and pellets are produced worldwide by Vale S.A. (NYSE:VALE), a sizable mining company. To focus on iron ore, nickel, and copper, the company sold off noncore assets including its steel, coal, and fertilizer businesses in recent years. The bulk materials division, which mainly sells iron ore and iron ore pellets, accounts for the majority of earnings. The relatively smaller base metals category consists of copper mines that produce copper in concentrate and nickel mines and smelters. It has decided to sell a minority 13% ownership in energy transition metals, its base metals business, which is slated to go into effect in 2024 and is likely the first step in separating base metals from iron ore.
The Q2 2024 performance of Vale met analysts’ expectations. The primary driver of earnings, iron ore sales volumes, jumped by 25% from the previous quarter and by 7% YoY. Although first-half sales volumes of 144 million metric tons are 10% higher YoY, Vale maintained its guidance for 2024 output of 310 million to 320 million metric tons. Analysts believe 2024 sales volumes are likely to be lower than production, as has generally been the case in recent years, despite the strong first half and sales generally being greater in the second half due to seasonal factors. Therefore, Morningstar analysts have kept the 2024 iron ore sales prediction at 305 million metric tons, which is unchanged from 2023. The quarter’s average iron ore fines prices of roughly $98 per metric ton and the half-year average of $99 are in line with its full-year assumption of roughly $101.
With record iron ore output and advancements on significant expansion projects adding 30 million tonnes of capacity, Vale S.A. (NYSE:VALE) recently reported good operational performance. Most crucially, Vale’s reduced unit costs in comparison to producers in India and China, as well as high-cost producers like Anglo American, enable it to remain profitable even in low-price conditions. There are 9 analysts who have collectively rated the stock as a “buy”, with an upside of 63%.
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