Druckenmiller's Duquesne Loads Up on Vale as Iron Earnings Grow

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(Bloomberg) -- Hedge funds and other big investors piled into Vale SA in the third quarter as the world’s biggest iron-ore producer heads for its most profitable year since 2013.

Funds bought a combined 470 million American depositary receipts in the Brazilian company, according to filings compiled by Bloomberg as of Nov. 15. It was their second biggest increase in position in the materials sector.

Billionaire investor Stan Druckenmiller’s Duquesne Family Office LLC added Vale, with the purchase of ADRs that were valued at $25 million by Sept. 30, a filing showed Tuesday. Arrowstreet Capital Ltd. Partnership and Two Sigma Advisers LP were also Vale buyers last quarter. 

The Rio de Janeiro-based company is churning out record amounts of high-grade ore that produce less emissions in the steel-making process at a time China is seeking to lower pollution levels. With premiums for top-shelf ore rising, Vale is expected to post $14.5 billion in earnings before interest, taxes, depreciation and amortization this year, the most since 2013, according to the average estimate of analysts tracked by Bloomberg.

After initially signaling a desire to shake things up, new Chief Executive Officer Fabio Schvartsman appears comfortable fine-tuning the cost-cutting strategy laid out by his predecessor. He’s also looking for ways to turn around under-performing assets such as the company’s New Caledonia nickel operations.

Vale is also streamlining its ownership structure with a plan to end a 20-year shareholder pact with members that include state pension funds and development bank, and list shares on a section of Brazil’s exchange with higher standards of corporate governance.

Barclays Plc analysts including Amos Fletcher raised their target price for Vale to $12 on Oct. 24, from $11 earlier, citing “earnings momentum, rapid deleveraging, structural margin improvements and valuation attractions.”

©2017 Bloomberg L.P.

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