Vale upgraded to ’BBB’ by S&P on improved risk controls

Investing.com -- S&P Global Ratings has upgraded Vale S.A.’s credit rating to ’BBB’ from ’BBB-’ with a stable outlook, citing the mining company’s improved risk controls and governance following the 2019 Brumadinho dam tragedy.

The rating agency noted that Vale has implemented significant risk controls and maintains robust risk policies with board oversight, which are incorporated into executive and employee variable remuneration. Management has consistently emphasized the company’s derisking strategy, investing substantial resources in dam structure remediation and indemnification of affected parties.

In August 2025, Vale completed the decommissioning of its last dam structure classified under emergency risk level 3, transitioning it to level 2 according to Brazil’s National Mining Agency (ANM). The company currently maintains four dams designated under emergency risk level 2, with the complete decommissioning program scheduled to be completed by 2035.

Vale has shifted its strategy to focus on profitability rather than volumes, aiming to maximize the value of its portfolio through optimal balance of silica and alumina blend with the capacity to adapt to market conditions. The company has delivered operational improvements, restored stability in iron ore output, improved nickel operational costs, and expanded copper production.

S&P expects Vale’s EBITDA to be lower in 2025 and 2026 due to reduced premiums and lower prices, particularly for iron ore, despite higher volumes. The agency anticipates nominal EBITDA growth afterward as volumes increase with the ramp-up of Capanema, Vargem Grande, and Brucutu in iron ore, and Salobo and Bacaba in copper.

While leverage is expected to increase amid lower EBITDA, S&P forecasts it will remain below 2x debt to EBITDA. The moderation in EBITDA is partly offset by the gradual reduction in payments related to Brumadinho and Mariana liabilities.

Vale faces significant ongoing cash outflows related to dam failures, with projected payments of $3.6 billion in 2025 and $2.5 billion in 2026. The Mariana definitive agreement totals over R$170 billion (approximately 28% completed), while the Brumadinho agreement amounts to R$63 billion (approximately 75% completed). The Brumadinho repair program is expected to continue through 2031.

The stable outlook reflects S&P’s view that despite EBITDA challenges from lower prices, Vale will maintain debt to EBITDA below 2x. The agency noted that an upgrade is unlikely as the ratings are currently capped at one notch above Brazil’s transfer and convertibility assessment.

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