Vale (NYSE: VALE) has reached its lowest market value since 2016, falling below $40 billion, according to a Citi assessment.

The bank reported that the Brazilian mining company’s market value stood at $36.8 billion.

Citi attributes the drop to investor pessimism but argues that Vale offers sufficient dividends to compensate for the investment.

Vale’s shares in Brazil fell by more than 23% in 2024, marking their worst annual return since 2015.

According to Citi, Vale’s decline reflects investor concerns over iron ore and nickel, as well as uncertainties surrounding Brazil and China.

Recently, Vale announced job cuts across its global operations to remain competitive. In a statement, the company said that “people in non-operating roles” would be leaving as the mining giant transitions to a “new decentralized structure.”

However, the bank maintains that Vale’s dividends provide enough value to justify the investment.

“At first glance, the market value below $40 billion appears undervalued compared to the 10-year average,” the report states, reiterating a buy recommendation for Vale’s shares. The price target for American Depositary Receipts (ADRs) was reduced from $15 to $12, still leaving a 39% upside potential.

Citi estimates an EBITDA of $13.8 billion for Vale in 2025, based on an iron ore price of $95 per ton. The bank believes the commodity may exceed the market’s more pessimistic expectations this year, enabling a dividend yield of 9%.

“We continue to recommend buying iron ore assets, which we view as undervalued by the market. Iron ore has been, by far, the biggest cash cow for the global mining industry over the past 50 years—low-price periods are painful but ultimately lead to a reconsolidated supply,” Citi highlights.

Vale’s shares were trading at $8.65 on Tuesday morning in New York, giving the company a market cap of $37.08 billion, compared to $123 billion for BHP (NYSE: BHP) and $94.05 billion for Rio Tinto (NYSE: RIO).

Vale aims to produce between 325 million and 335 million tons of iron ore in 2025, up from approximately 328 million tons in 2024.

Declining Iron Ore Price

Iron ore futures hit seven-week lows on Tuesday, weighed down by rising inventories of the steelmaking ingredient and disappointment over a lack of additional monetary stimulus in China.

The most-traded May iron ore contract on China’s Dalian Commodity Exchange (DCE) ended daytime trade 1.38% lower at 750 yuan ($102.38) per metric ton. Earlier in the session, the contract fell to its weakest level since November 19, at 745.5 yuan.

Source: MINING.COM – Read More