Vale, the Brazilian iron-ore mining giant, is withdrawing $US3 billion from pre-approved credit lines to boost liquidity as it works to sell assets amid slumping metals prices.
The Rio de Janeiro-based company will also use the money, which is part of a $US5 billion revolving credit program, to amortise bonds maturing in the first quarter of 2016, according to a statement released on Tuesday. It didn't disclose interest paid in the tranche, nor its maturity. Vale had $US1 billion in notes issued in 2006 with a 6.25 per cent coupon that matured on Monday.
The company, the world's biggest iron-ore producer and Brazil's most prolific investment-grade borrower, is contending with a slump in iron-ore prices, as well as the prospect of higher costs after a November dam spill at a site it co-owns in the Brazilian state of Minas Gerais. Last month, Vale lowered its iron-ore output forecast, and said divestment of non-core assets could generate $US4 billion to $US5.5 billion in 2016.
Vale's $US2.25 billion of notes due in 2022 lost 21 per cent last year, exceeding the average drop of 13 per cent for metals and mining companies from emerging markets, according to data compiled by Bloomberg.
"Vale is working on its long-term debt transactions aiming to reduce the use of revolving credit lines while the divestment program is not concluded," the company said in the statement. "Vale expects these transactions will preserve the average cost of its debt."
The shares slid 6.2 per cent to 7.43 reais at 2.07pm in Sao Paulo.
As for the outlook for iron ore, it remains bleak. Iron ore may tumble below $US35 a metric ton as steel mills in China face weak demand at home and increasing barriers to exports, according to Australia & New Zealand Banking Group. The steel-making raw material will remain weak through March and trade between $US35 and $US40, the bank forecasts in an emailed report. The probability of prices declining below this range in the short term is "rising daily", ANZ said.
Ore with 62 per cent content delivered to Qingdao retreated 2 per cent to $US41.31 a dry ton on Monday, dropping for a fifth straight day, according to Metal Bulletin. The commodity bottomed at $US38.30 on December 11, a record low in daily prices dating back to May 2009. Capital Economics sees prices swooning into the $US20s before rallying to end the year higher. Goldman Sachs Group has said the raw material will probably remain under $US40 for the next three years.