New CEO to steer Vale through rocky terrain

Brazilian mining giant Vale named its VP of finance and investor relations, Gustavo Pimenta, as the company’s new CEO, replacing Eduardo Bartolomeo.

“The succession process proved the high level of integrity, transparency and robustness of Vale’s governance," Vale chairman Daniel Stieler said in a statement.

“Let's go together on this journey, intensifying the dialogue with all our stakeholders and prioritizing the safety of people, our operations and the environment," said Pimenta.

He is expected to assume the post officially on January 1, 2025. 

The process of selecting Vale's new CEO was controversial, with the federal government, which has an indirect stake of less than 10% in the company through the Previ pension fund, trying to influence the choice. 

Vale initially drew up a list of 15 names that in recent weeks was trimmed down to three. In addition to Pimenta, Ruben Fernandes, an executive at Anglo American, and Marcelo Bastos, a former executive at BHP and also at Vale, were considered for the post.

Pimenta will face major challenges, including the need to increase iron ore output and to boost production of minerals associated with the energy transition, such as copper and nickel. 

He will also face the challenge of maintaining good relations with the federal government, which has repeatedly said that it wants to see Vale investing more in projects within Brazil rather than abroad. 

"Vale, like all mining companies, ends up working under a concession contract, as everything the company mines is technically owned by the federal government. Due to the nature of the business, it is mandatory for the company to have a good relationship with the federal government, but this isn't always possible as many of the company's minority shareholders are interested in short-term financial returns and the government wants the company to invest in structural and long-term projects,” an executive who worked at Vale in the area of public relations and institutional affairs, told BNamericas, asking not to be identified. 

"Vale's political relationship is something that will always exist, with some moments of greater conflict and others of lesser conflict with the federal government." 

ONGOING TALKS 

Vale, which is one of the world’s largest iron ore producers and also a major logistics operator, is currently in talks with the government regarding the early renewal of contracts for the Carajás railroad, known as the EFC, and also the Vitória Minas railroad (EFVM).

"The federal government, through the ministry of transport, is currently negotiating an agreement with Vale for the firm to renew its rail concession contracts, bringing forward a series of investments," Marcus Cavalcanti, head of the government's investment partnerships program (PPI), told BNamericas in a recent interview.

"Although an agreement is not expected immediately because there are also negotiations with [transport regulator] ANTT, negotiations are progressing well," he added.

In 2020, Vale reached an agreement with the federal government, then headed by Jair Bolsonaro, to renew the two railway contracts, which are due to expire in 2027, bringing forward investments of 24.7bn reais (currently US$4.4bn).

However, after President Luiz Inácio Lula da Silva took over in January 2023, the new government began a process to review the agreements as it considered the pledged investments to be too low. 

When asked by BNamericas about what investments the federal government would consider fair to receive from Vale for the early renewals, Cavalcanti declined to comment.

In addition, Vale is in talks with local authorities to reach a final agreement in the biggest mining litigation case in the country's history. 

Iron ore pellet producer Samarco, a joint venture between Vale and BHP, was responsible for the country's worst environmental mining disaster in 2015 when a tailings dam collapsed, destroying communities in Mariana, Minas Gerais state, killing 19 people and causing extensive environmental damage.

Samarco, Vale and BHP have been holding talks with authorities on a compensation agreement, which is likely to be the largest in the country’s history. 

The attorney general’s office (AGU) recently rejected a Vale-BHP offer of 127bn reais that would have involved only 72bn reais in fresh funds, as the companies claim they have already disbursed billions in compensation since the collapse of the dam.

AGU is demanding 109bn reais in fresh funds to be paid over 12 years, on top of the amount already paid.