Vale SA (NYSE: VALE): This Emerging Market Mega-Miner Is Taking Production to Another Level
You might think you know everything you need to know about Vale SA (NYSE: VALE), but you don't.
This is a company that, while big, is rife with hidden profit potential.
Vale is what I like to call a "mega-miner." It's best known as the world's largest iron ore producer, but few realize that it also controls railroads, ports and shipping fleets.
Indeed, Vale is a vertically integrated company with a diverse mix of assets that includes more than 6,000 miles (10,179 kilometers) of railroad infrastructure, eight seaport terminals, five general cargo ports, and two iron ore export terminals. Beyond that, it generates its own energy through hydroelectric power plants.
And better still, Vale has the internal capital to self-fund further development.
These characteristics imbue the company with major profit potential.
So Vale SA is an unequivocal "Buy" (**).
Taking Charge of the Iron Ore MarketVale is the world's second-largest mining company, behind only BHP Billiton Ltd. (NYSE ADR: BHP).
It's the world's largest producer of iron ore, and the world's second-largest producer of nickel. And that gives the company significant leverage in the fast-growing economies of Asia, especially China.
Historically, Vale had to battle the added costs of longer-term production contracts and short-term shipping rates. But that's no longer the case.
Last year, iron ore pricing moved to short-term contracts based on the spot market -- to the benefit of producers. And to combat shipping costs, Vale recently bought its very own fleet of large ore-carrying vessels. Now it controls its own shipping rates.
These new developments mean that Vale will no longer be held hostage to long-term production contracts or to short-term shipping rate demands.
Now that Vale has full control over its iron ore business, it can look forward to newer ventures. And it has a big-time market in its sights.
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