The following press release was on Mineweb this morning re: Vale (CVRD - who formerly took over Inco). As most of you know, they were at the presentation given by Noront that was extensively reported on by QQ Girl. They are considered one of the more likely large companies (if not the most likely) to make a favorable buyout of Noront's Ring of Fire possessions. So, I thought this article of interest to those of us who follow such things. I have highlighted what I consider some of the more pertinent parts by placing them in bold type.

S&P praises Vale’s stronger capital structure, liquidity, strong business profile

S&P has raised the credit rating for Brazil’s Vale, the world’s top iron ore miner, citing its solid financial performance, improved liquidity and positive cash flow fundamentals.

Author: Dorothy Kosich
Posted: Wednesday , 30 Jul 2008

RENO, NV -

Citing Vale's stronger capital structure and its recent $11.45 billion global share offering, Standard & Poor's Tuesday raised its long-term corporate credit rating on Companhia Vale do Rio Doce (now known as Vale) to ‘BBB+' from ‘BBB' and removed it from CreditWatch Positive where it was placed on June 16th.

Primary Credit Analyst Reginaldo Takara and Secondary Credit Analyst Marcelo Costa said the recent share offering "adds to the company's liquidity and its ability to handle its aggressive capital expenditure (capex) program. The upgrade also reflects Vale's positive cash-flow fundamentals in the next two years, thanks to robust iron ore prices and increasing production as well as favorable profitability in other metal commodities."

The analysts also said the company has a "strong business profile, characterized by its leading position in seaborne iron ore and a very favorable position in nickel; improved geographic and product diversification; attract (though more volatile) fundamentals for nickel; and a very competitive cost structure in most metallic commodities the company producers."

However, S&P noted, "These positives are partly offset by an aggressive capex program and sizable dividend distribution, some dependence on China's economic performance, and an acquisitive business strategy."

"Despite some cost pressures from the appreciation of the Brazilian currency, declining nickel prices, and some production interruptions in the first-quarter 2008, Vale's financial performance remains solid, with robust cash generation and a steady capital structure."

The analysts advised that "cost inflation remains a major challenge, particularly in the context of the appreciation of the Brazilian real, but Vale has been successful in controlling production costs. Cost inflation also affects the company's current significant capex program." Vale plans to invest $11 billion this year which include major expansions and greenfields projects in iron ore, nickel, coal and copper. The company's total capex program is $59 billion.

However, S&P expects the 65% price increase for iron ore and 87% increase for pellets will boost cash flow performances "significantly in the next few quarters, as production ramps up with the start-up of relevant new capacities in Brazil."

S&P expects Vale's financial metrics to improve further until the end of this year, not because of debt reduction, but rather due to increased cash flow. "We expect market conditions for Vale to remain quite favorable, despite metal commodity price volatility that especially affects nickel prices. Thanks to its strong cost position in most products it trades, we expect Vale to continue reporting margins fairly higher than its peers, leading to further improvement of its credit metrics."

The analysts gave Vale a stable outlook reflecting "our expectations that Vale will sustain strong credit measures on a permanent basis due to strong cash flow fundamentals, and does not take account of possible large merger and acquisition transactions."