New Vale CEO [Murilo Ferreira] sees growth with better gov’t ties – Reuters/Mining Weekly.com (May 20, 2011)

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 RIO DE JANEIRO – The incoming chief executive of Brazilian mining giant Vale vowed on Friday to maintain the company’s booming growth while improving the frayed ties with government leaders that forced the ouster of his predecessor.

Murilo Ferreira, 57, will have to mend fences with President Dilma Rousseff, who led a campaign to remove outgoing CEO Roger Agnelli following years of bitter accusations that Vale was not investing enough in the steel industry or doing enough to help Brazil’s economy.

“Our relationship with the government will be open, frank, and constructive,” Ferreira said during a news conference at Vale’s headquarters in downtown Rio de Janeiro. “The company will continue working under the same vision that brought it success in recent years.”

Investors will likely applaud the end of a rocky leadership transition at the world’s largest iron ore miner, whose stock has slumped this year on uncertainty over its future.

But an expansion of government influence throughout Brazil’s economy may leave Vale facing further state pressures to expand its steel business, which creates more jobs than mining but offers lower returns to shareholders.

Ferreira, who takes office on Sunday, said the company was enthusiastic about the steel ventures it is already a part of, but left no doubts as to the company’s primary focus.

“With respect to steel-making, it’s important to point out that Vale is a mining company. Period,” he said.

He said the company’s strategic plan and 2011 budget of $24 billion would remain intact, in line with market expectations that the company would continue along the same path. He said he would maintain all but one of Vale’s existing directors.

Ferreira said Vale and authorities need to reach common ground in a dispute over mineral royalty payments that government leaders say may reach $2 billion. Agnelli’s intransigent stance on that issue may have hastened his departure.

NEW ERA

Known as a soft-spoken but cost-conscious manager, Ferreira clashed with Agnelli in the past and strenuously opposed his former boss’s attempt to take over Anglo-Swiss miner Xstrata — a bid that ultimately failed.

Markets have been pleased with the designation of Ferreira, an industry veteran with more than 30 years of experience who previously ran Vale’s Canada division. Some had worried Rousseff, a left-leaning career technocrat who took office on Jan. 1, would tap an inexperienced political appointee.

Vale has become a Wall St. darling because of its enormous iron ore and nickel reserves, its low operating costs, and its strong foothold in the world’s top iron consumer, China. Strong iron demand helped boost the company’s first-quarter profit more than four-fold from the year before to $6,8 billion.

Turning the page on months of nail-biting uncertainty could help turn around the company’s shares, which have shed as much as 14 percent since mid-January when speculation over Agnelli’s departure mounted.

“The change in CEO, scheduled for May 22, could be one of the drivers for reversal of the (stock’s underperformance), as we believe the new CEO will not change the company’s strategy/investments materially,” Goldman Sachs analysts Marcelo Aguiar, Pedro Grimaldi and Diogo Miura wrote in a research note.

Vale’s nonvoting shares, the company’s most widely traded class of stock, were up 0.55 percent at 43.70 reais in afternoon trading in Sao Paulo on Friday. The Bovespa index was up 0,77 percent at the time.

Agnelli’s abrupt ouster sparked harsh criticism by opposition leaders, who called Rousseff’s bid to remove him a veiled state takeover of the company amid a broader expansion of the state’s role in the economy.

His leadership was crucial in transforming Vale from a small recently privatized concern into the world’s second-largest mining company with a global reach.

Under his decade-long tenure the company’s stock soared more than 1 200 percent, and iron ore production jumped more than 80 percent.

Political leaders were furious with him for firing workers in the wake of the 2008 financial crisis and for purchasing iron cargo vessels from China rather than Brazilian shipyards.

Edited by: Reuters

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