What is driving Vale SA (NYSE: VALE) stock

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Vale SA (NYSE: VALE), Brazilian iron ore miner, stock rose over 5.92% on 29th April, 2020 (As of 12:05 pm GMT-4; Source: Google finance) on better than expected results. Due to outbreak of COVID-19, in the Iron Ore business, the company has temporarily halted operations in the Teluk Rubiah Maritime Terminal in Malaysia, with no impact on production. In the Base Metals business, the company has ramped down its Voisey’s Bay mining operation and placed it on care and maintenance for up to 4 months, and in the Coal business, the company decided to postpone plans for the coal processing plant maintenance revamp in Mozambique.

The company has revised its production guidance for its businesses. For fiscal 2020, the company expects iron ore fines production to be in the range of 310-330 Mt (from 340-355 Mt), pellets production to be in the range of 35-40 Mt (from 44 Mt), nickel production to be in the range of 180-195 kt1 (from 200-210 kt) and copper production to be in the range of 360-380 kt (from 400 kt), while the guidance for coal production was withdrawn.

Meanwhile, Vale has reported a net income of $239 million and earnings before interest, taxes, depreciation and amortization, or EBITDA, of $2.88 billion, while the analysts polled by Refinitiv had predicted Vale would post EBITDA of $3.18 billion. In 1Q20, proforma adjusted EBITDA, excluding the provisions and incurred expenses related to Brumadinho, were of total US$ 3.041 billion, which is US$ 1.636 billion lower than in 4Q19, mainly due to seasonal lower volumes in the first quarter, the partial stoppage of Brucutu plant and scheduled and unscheduled maintenances carried out in the period, that impacted the  sales volumes in Ferrous Minerals (US$ 1.593 billion), lower nickel and copper realized prices (US$ 249 million) and lower base metals sales volumes (US$ 149 million), which were partially offset by the positive effect of the Brazilian real devaluation (US$ 179 million). As a result, Vale has generated US$ 380 million in Free Cash Flow from Operations in 1Q20, which is US$ 947 million lower than in 4Q19. Further, during the quarter, there was US$ 549 million reduction in the US dollar value of the debt denominated in Brazilian Reais due to the devaluation of the currency, the net debt remained relatively stable at US$ 4.808 billion.

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