) recently announced that its management has approved a capital
expenditure budget of $14.8 billion for 2014. The budget
signifies a year-over-year decline for the third time in a row
after reaching its highest of $18.0 billion in 2011. The
reduction reflects the company's plans to focus on its core
competencies and thereby increase shareholders' returns.
Of the allocated amount, $9.3 billion or 63.0% is marked for
project execution expenditure, $4.5 billion or 30.8% for
sustaining existing operations and the remaining $0.9 billion or
roughly 6.2% for research and development.
Expenditure on bulk materials represents a major chunk of the
total budget. In the project execution segment bulk materials
accounts for 86.2% of the total budget, while expenditure on base
metals, fertilizers, power generation and steel represent 8.5%,
0.6%, 1.9% and 2.8%, respectively.
The sustainment budget includes five dimensions: building and
expanding waste dumps and tailings dams ($706 million); corporate
social responsibility ($402 million); operations, mainly
equipment replacement ($2.5 billion); health & safety ($433
million) and administrative and others ($542 million).
The company has been attempting to narrow its diverse
geographical presence, which leads to a reduction in the research
and development expenditure. Vale executes strategies to expand
its large scale production facilities along with reducing costs.
With respect to planned expenditure, the company intends to spend
$356 million for conceptual, pre-feasibility and feasibility
studies; $384 million for mineral exploration and $163 million in
new processes, technological innovation and adaptation.
With such planned expenditure, we expect the company to
perform well over the coming quarters. This Zacks Rank #2 (Buy)
company currently has an expected earnings per share growth rate
of 28.5% (over the next five years). Vale has a market
capitalization of $76.7 billion. Other stocks worth considering
in the industry include
Alderon Iron Ore Corp.
Cliffs Natural Resources Inc.
United States Steel Corp.
), each with a Zacks Rank #2.
ALDERON IRON (AXX): Free Stock Analysis
CLIFFS NATURAL (CLF): Free Stock Analysis
VALE SA (VALE): Free Stock Analysis Report
UTD STATES STL (X): Free Stock Analysis
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