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dudemonkey (56.87)

Brazil may seek to renationalize VALE



August 03, 2009 – Comments (0)

Vale is the 2nd largest diversified miner and has a huge pool of protected assets in the form of mineral rights in Brazil.  They have subsidiaries and branches throughout the world, including Canada and Africa.  It was formed in 1942 as a wholly-owned governmental company and privatized in 1997.  

Vale has a strong balance sheet with consistent FCF and FCF-growth (well, as consistent as you get in the mining industry).  The overall economy of Brazil is strong and it remains one of the very few economies relatively unscathed by the  2008 financial crisis.

This pronouncement by President Lula suggests that the popular president may take steps to recover governmental ownership of Vale.  This is still in the unsubstantiated rumor phase and speculators seem to want to continue buying Vale despite this rumor, but this gives an opportunity for intelligent investors to exit their holdings in Vale for the dual reasons of uncertainty about the safety of their investment and the company's stock being possibly overvalued (I calculate that it is worth slightly less than it's currently trading for, but use your own research).

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