Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

Equity Bottom-Up

<ul>
<li>We summarize the sensitivity of high-yield stocks <a href="https://www.smartkarma.com/entities/vale-sa" target="_blank" rel="noopener">Vale (VALE US)</a> and <a href="https://www.smartkarma.com/entities/fortescue-metals-group-ltd" target="_blank" rel="noopener">Fortescue Metals (FMG AU)</a> to the iron ore price. We try to answer what's priced in at 100 USD/ton.</li>
<li>We provide sensitivity tables for both stocks based on a range of 90-130 USD/ton. At 100 USD/ton, <a href="https://www.smartkarma.com/entities/vale-sa" target="_blank" data-smartkarma-citation="entities:23731:1" rel="noopener">Vale (VALE US)/Fortescue Metals (FMG AU)  </a> trade at 7.4/6.4% dividend yields.</li>
<li>Bullish iron ore participants subscribing to the 130 USD/ton forecast can see yields of 16.3%/11.4%. This forecast will be achievable if the China stimulus provides the expected impetus.</li>
</ul>


We summarize the sensitivity of high-yield stocks Vale (VALE US) and Fortescue Metals (FMG AU) to the iron ore price. We try to answer what's priced in at 100 USD/ton.
We provide sensitivity tables for both stocks based on a range of 90-130 USD/ton. At 100 USD/ton, Vale (VALE US)/Fortescue Metals (FMG AU)   trade at 7.4/6.4% dividend yields.
Bullish iron ore participants subscribing to the 130 USD/ton forecast can see yields of 16.3%/11.4%. This forecast will be achievable if the China stimulus provides the expected impetus.


High Yield Iron Ore Stocks: VALE US/FMG AU Sensitivity to Iron Ore

<ul>
<li>In the countdown to the <a href="https://www.scmp.com/business/china-business/article/3289527/investors-search-fresh-china-stimulus-signs-ahead-xi-jinpings-economic-conference" target="_blank" rel="noopener">China Economic Work Conference (CEWC)</a>, which<a href="https://www.scmp.com/business/china-business/article/3289527/investors-search-fresh-china-stimulus-signs-ahead-xi-jinpings-economic-conference" target="_blank" rel="noopener"> </a>will be held on December 11th/12th, the iron ore market remains range-bound, expecting further clarity on the economic stimulus.</li>
<li>Stocks like <a href="https://www.smartkarma.com/entities/vale-sa" target="_blank" data-smartkarma-citation="entities:23731:1" rel="noopener">Vale (VALE US)</a> and <a href="https://www.smartkarma.com/entities/fortescue-metals-group-ltd" target="_blank" data-smartkarma-citation="entities:41:1" rel="noopener">Fortescue Metals (FMG AU)</a> continue to trade at double-digit dividend yields (9-10%), assuming 100 USD/ton.</li>
<li>With China's PMI improving, despite high inventories, there is an expectation of a restock for iron ore in the short term. We remain skeptical and continue to see range-bound activity.</li>
</ul>


In the countdown to the China Economic Work Conference (CEWC), which will be held on December 11th/12th, the iron ore market remains range-bound, expecting further clarity on the economic stimulus.
Stocks like Vale (VALE US) and Fortescue Metals (FMG AU) continue to trade at double-digit dividend yields (9-10%), assuming 100 USD/ton.
With China's PMI improving, despite high inventories, there is an expectation of a restock for iron ore in the short term. We remain skeptical and continue to see range-bound activity.


Iron Ore Tracker (9-Dec-2024): Stuck In A 95-110 USD/Ton Band, Restock On The Cards?

<ul>
<li>The BHP-China dispute seeks to revert to pre-2010 contractual norms, but we believe <a href="https://www.smartkarma.com/entities/bhp-group-ltd" target="_blank" data-smartkarma-citation="entities:147:1" rel="noopener">BHP Group Ltd (BHP AU)</a>  has the advantage, given its market position and strategic leverage.</li>
<li>Investigations into the<a href="https://www.mining.com/fatal-accident-forces-winning-to-halt-iron-ore-mine-at-simandou/" target="_blank" rel="noopener"> accident at Simandou</a> are underway, and the mine remains shut with no progress on construction until the issue is resolved. </li>
<li>We like <a href="https://www.smartkarma.com/entities/fenix-resources-ltd" target="_blank" data-smartkarma-citation="entities:7405:1" rel="noopener">Fenix Resources (FEX AU)</a> and are bullish on the name. Read our recent update, <a href="https://www.smartkarma.com/insights/fenix-resources-fex-au-exciting-value-adding-catalyst-can-triple-production-again" target="_blank" data-smartkarma-citation="insights:200341" rel="noopener">Fenix Resources (FEX AU): Exciting Value-Adding Catalyst Can Triple Production Again</a>. </li>
</ul>


The BHP-China dispute seeks to revert to pre-2010 contractual norms, but we believe BHP Group Ltd (BHP AU)  has the advantage, given its market position and strategic leverage.
Investigations into the accident at Simandou are underway, and the mine remains shut with no progress on construction until the issue is resolved. 
We like Fenix Resources (FEX AU) and are bullish on the name. Read our recent update, Fenix Resources (FEX AU): Exciting Value-Adding Catalyst Can Triple Production Again. 


On The BHP-China Impasse: Iron Ore Will Continue To Be Over 100 USD/Ton

<ul>
<li>Jan-Mar 2025 shipments for Australian miners <a href="https://www.smartkarma.com/entities/rio-tinto-ltd" target="_blank" data-smartkarma-citation="entities:13:1" rel="noopener">RIO AU</a>, <a href="https://www.smartkarma.com/entities/bhp-group-ltd" target="_blank" data-smartkarma-citation="entities:147:1" rel="noopener">BHP AU</a>, and <a href="https://www.smartkarma.com/entities/fortescue-metals-group-ltd" target="_blank" data-smartkarma-citation="entities:41:1" rel="noopener">FMG AU</a>  were sluggish, registering -9.3%,-4.3%, and 0.4% YoY, respectively, due to inclement weather.</li>
<li>
<a href="https://www.smartkarma.com/entities/vale-sa" target="_blank" data-smartkarma-citation="entities:23731:1" rel="noopener">Vale (VALE US)</a> shipments were comparatively better, up 3.6% YoY to 66.1 mn tons. The big four kept their annual production guidance intact. </li>
<li>Positive news came from Vales China clients, as blast furnace utilization passed 90%, and some mills are now making cash profits of 200 RMB/ton. </li>
</ul>


Jan-Mar 2025 shipments for Australian miners RIO AU, BHP AU, and FMG AU  were sluggish, registering -9.3%,-4.3%, and 0.4% YoY, respectively, due to inclement weather.

Vale (VALE US) shipments were comparatively better, up 3.6% YoY to 66.1 mn tons. The big four kept their annual production guidance intact. 
Positive news came from Vales China clients, as blast furnace utilization passed 90%, and some mills are now making cash profits of 200 RMB/ton. 


Gleanings From The Q1 CY25 Shipments Conference Calls Of Vale, Rio, BHP, and FMG

Global Materials | Industrials | Commodities

Rahul Jain

<ul>
<li>Vale is guiding for stable iron ore production of 325–335 Mt in 2025 and steady copper and nickel growth, supported by disciplined capex and portfolio optimization.</li>
<li>While dam reparation exposures are fully provisioned, execution risks around ongoing environmental obligations and community projects remain a critical overhang.</li>
<li>The stock appears cheap at ~3.1x EV/EBITDA but looks relatively expensive on a reserve-based valuation, reflecting the market’s cautious view on long-term growth visibility and external risks.</li>
</ul>


Vale is guiding for stable iron ore production of 325–335 Mt in 2025 and steady copper and nickel growth, supported by disciplined capex and portfolio optimization.
While dam reparation exposures are fully provisioned, execution risks around ongoing environmental obligations and community projects remain a critical overhang.
The stock appears cheap at ~3.1x EV/EBITDA but looks relatively expensive on a reserve-based valuation, reflecting the market’s cautious view on long-term growth visibility and external risks.


Brazil

Vale S.A. produces and sells iron ore, pellets, manganese, alloys, gold, nickel, copper, kaolin, bauxite, alumina, aluminum, and potash. The Company is based in Brazil, where it owns and operates railroads and maritime terminals.

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Vale (VALE US)

High Yield Iron Ore Stocks: VALE US/FMG AU Sensitivity to Iron Ore

We summarize the sensitivity of high-yield stocks Vale (VALE US) and Fortescue Metals (FMG AU) to the iron ore price. We try to answer the question...

Sameer Taneja

Iron Ore Tracker (9-Dec-2024): Stuck In A 95-110 USD/Ton Band, Restock On The Cards?

The iron ore market is range-bound in the countdown to the China Economic Work Conference (CEWC), which will be held on December 11th/12th. How do...

Sameer Taneja

On The BHP-China Impasse: Iron Ore Will Continue To Be Over 100 USD/Ton

BHP supplies 13% of China’s 1.24B tons of iron ore imports; Australia 60%. China accounts for 70% of seaborne imports. The recent ban likely...

Sameer Taneja

Gleanings From The Q1 CY25 Shipments Conference Calls Of Vale, Rio, BHP, and FMG

We update the operational/shipment performance of the iron ore majors and outline the importance of tracking their numbers.

Sameer Taneja

Vale: A valuation paradox

Vale expects stable iron ore production by 2025, with growth in copper and nickel, but faces risks from environmental obligations and community...

Rahul Jain

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

High Yield Iron Ore Stocks: VALE US/FMG AU Sensitivity to Iron Ore

We summarize the sensitivity of high-yield stocks Vale (VALE US) and Fortescue Metals (FMG AU) to the iron ore price. We try to answer the question...

Sameer Taneja

Iron Ore Tracker (9-Dec-2024): Stuck In A 95-110 USD/Ton Band, Restock On The Cards?

The iron ore market is range-bound in the countdown to the China Economic Work Conference (CEWC), which will be held on December 11th/12th. How do...

Sameer Taneja

On The BHP-China Impasse: Iron Ore Will Continue To Be Over 100 USD/Ton

BHP supplies 13% of China’s 1.24B tons of iron ore imports; Australia 60%. China accounts for 70% of seaborne imports. The recent ban likely...

Sameer Taneja

Gleanings From The Q1 CY25 Shipments Conference Calls Of Vale, Rio, BHP, and FMG

We update the operational/shipment performance of the iron ore majors and outline the importance of tracking their numbers.

Sameer Taneja

Vale: A valuation paradox

​Vale expects stable iron ore production by 2025, with growth in copper and nickel, but faces risks from environmental obligations and community...

Rahul Jain

Vale expects stable iron ore production by 2025, with growth in copper and nickel, but faces risks from environmental obligations and community...