Few companies offer a more stunning testimonial to the benefits of privatization–and fortuitous timing–than the formerly state-owned Brazilian mining firm Companhia Vale do Rio Doce. In the 55 years following its founding in 1942, Vale, as it is now known, grew into a comfortably large domestic player. Since being unshackled from Brazil’s state bureaucracy in 1997, Vale has soared into the ranks of global-commodities powerhouses, with net income rising from $680 million in 2002 to $9.2 billion in the first nine months of 2007, placing it as one of the top-three diversified mining and metals firms in the world. The industry has become blast-furnace hot: witness BHP Billiton’s hostile $147.4 billion bid for iron-ore-rich Rio Tinto Group.
Already the world’s largest producer of iron ore and one of the largest producers of nickel, Vale is also a growing force in copper, manganese, bauxite, precious metals, aluminum, coal, steel and energy. Its stock price has more than doubled in the past year, to nearly $33, and the company’s market value is about $160 billion, 16 times what it was in 1997. Douglas B. Silver, an industry veteran and CEO of Colorado-based International Royalty Corp., calls Vale “the most effective giant mining company in the world,” not just for its size but also for its skill at operating in difficult emerging markets. Along the way, Vale has built what could be a model for other formerly state-run enterprises hoping to make a mark on the world stage.
Roger Agnelli, a 48-year-old investment banker, became CEO in 2001. He inherited a company whose historic strength lay deep in the Amazon, in the massive iron-ore deposits of Carajas. Iron ore then accounted for 75% of Vale’s revenues, and Agnelli’s first move was to consolidate domestically, by selling off peripheral holdings in paper and forestry (Agnelli’s family business) and using the proceeds to swallow eight rival firms.