Mining

CVRD (Vale)

Last edited by Phil Mattera on July 19, 2010 - 8:16pm
Profile editor: 
Phil Mattera
Company Snapshot: 

Over the past decade, Brazil-based Vale has evolved from a large but little known producer of iron ore to one of the world’s mining leviathans—the only one based in the global south. The major factor in its growth was the US$19 billion acquisition of Canada’s big nickel producer Inco in 2006. It also made an aborted effort to acquire the Swiss mining giant Xstrata. Originally a government-owned firm called Companhia Vale do Rio Doce (literally, “sweet river valley company"), Vale was privatized in 1997. Since then it has been more aggressive in its exploration and its labor policies, coming into conflict with indigenous groups, environmentalists and trade unions both in Brazil and abroad.

Ownership status: 
Publicly traded
Number of employees worldwide: 
57,000
Chief executive officer: 
Roger Agnelli
Website: 
www.vale.com
Global Fortune 500 rank: 
205
Tel: 
55 21 3814-4477
Fax: 
55 21 3814-4040
Net Income: 
US$11.8 billion
Total revenue: 
US$33.1 billion
Corporate accountability
Accountability overview: 

While it was government-owned, Vale tended to follow paternalistic policies towards its workers and the communities in which it operated. Those policies, some of which were mandated by Brazilian law, tended to disintegrate after the company was privatized. Vale also inherited a new set of labor and environmental controversies after it took over Canada’s Inco.

Labor: 

Labor relations at Vale’s Brazilian operations became more strained after the government sold off its share of the company. Management “has to treat its workers better,” said a union official quoted in a July 7, 2003 article in the newsletter Business News Americas. The article noted that workers were pressing for bigger wage increases both by carrying out brief work stoppages and by staging a protest in which they waved bananas to symbolize the meager nature of management’s contract offer.

When Vale took over Inco in 2006, it inherited a company with tumultuous labor relations at its Canadian operations. After Inco’s competitive position began to erode in the 1960s and management responded by resisting wage increases, strikes became more common. When the company implemented drastic job cuts in 1978, Inco’s unions staged a walkout that lasted for eight months.

After Vale clinched the deal for Inco, the Canadian Steelworkers union sent a delegation to Brazil to learn about the labor practices of the new parent company. The group found that Vale had been “outsourcing union jobs and restraining wage increases.”

The Brazilian and Canadian unions began ongoing consultations about conditions at Vale. In March 2007, the Canadian Steelworkers hosted a meeting with other trade unions representing Vale workers not only in Brazil but also in Mozambique and New Caledonia. The unions approved a Unity Accord.

In August 2008 the Canadian unions met in Manitoba with their Brazilian counterparts to discuss solidarity measures during contract negotiations. Two months later, Vale Inco workers in northern Manitoba reached agreement with the company on the first new labor contract since Vale took over Inco. The pact provided workers with pay increases of about 14 percent over three years.

In December 2007 workers at Vale Inco’s operation in Indonesia won significant pay and other contract improvements after staging an 11-day strike.

In July 2009 workers at Vale Inco operations in Ontario went on strike to resist company demands for contract concessions. In October the company resumed operations using non-union employees. The Steelworkers escalated their pressure campaign against the company and finally won a new contract that union members approved in July 2010.

Environment and product safety: 

In 2003 Brazilian authorities fined Vale the equivalent of US$3.5 million after one of the company’s trains derailed and spilled more than 185,000 gallons of various toxic chemicals into the Congohas River in Minas Gerais. The spill also caused an explosion and a fire.

In July 2008 officials in Brazil fined Vale the equivalent of about US$3 million for the illegal sale of timber felled in the course of clearing land for a bauxite mine. The company denied the allegation.

Human rights: 

With the purchase of Inco, Vale took over responsibility for the Canadian company’s controversial mining operations in Indonesia and the French-controlled South Pacific island of New Caledonia.

Working in partnership with some Japanese companies, Inco started developing an open-pit nickel site on the Indonesian island of Sulawesi in 1973 and officially began mining in 1977. According to various independent and academic reports, the project caused significant dislocation of communities whose members were not given fair compensation for their land. The Indonesian government was also said to be receiving substandard royalties on the mine’s output.

Expansions of the operation in more recent times have also exacerbated relations with local communities. In 2005 protesters held a hunger strike and a blockade at the mine to publicize the ongoing dispute over compensation for displaced families. In 2008 the Indonesia government called for a summit meeting to review the company’s latest plans.

Inco has been embroiled in similar controversies at its Goro nickel project in New Caledonia, which uses a difficult and allegedly hazardous process involving acid and high temperatures to separate the nickel from the ore. The company has come into conflict with the indigenous Kanak people, some of whom blockaded the site for a period of time in 2006. A Kanak advocacy organization called Rheebu Nuu also filed suit to have the company’s mining license revoked. In 2006 a French court issued an injunction that forced Inco to halt construction of a waste storage facility on the site, but in February 2007 the company, by then owned by Vale, won its appeal, and construction resumed. The mine is expected to begin production in 2009.

Vale has also had conflicts with indigenous peoples in its home country. In October 2006 members of the Xikrin tribe occupied portions of Vale’s operations in the company-run town of Carajas in Brazil in an effort to increase the compensation paid by Vale to the indigenous community. The protest ended after two days, but the company sought to punish the tribe by filing a lawsuit seeking US$10 million in damages.

In March 2008 protesters from the Landless Rural Workers Movement (MST) occupied and vandalized a Vale pig iron plant in northeastern Brazil to demand the closing of some 70 charcoal furnaces. That same month, protesters from MST and Via Campesina blockaded a Vale rail line to protest the company’s construction (with a partner) of a hydroelectric dam that displaced several thousand people from their homes.

In July 2008 the Brazilian government accused a Vale subsidiary of illegally paying peasants to move off land that they were cultivating but which was technically owned by the National Institute of Colonization and Land Reform (Incra).

Also in 2008, several Vale facilities in Brazil were among the sites targeted by protestors during widespread demonstrations over commodity speculation and rising food prices.

History

After Brazil became a republic in 1889 through a military coup, the new constitution opened the way for foreign companies to invest in the country’s mineral resources. Much of the attention was focused on the rich iron deposits in the Doce River Valley in the state of Minas Gerais, and the dominant player was the British-owned group Itabira Iron Ore Company.

The period of foreign control came to an end in the 1930s, when a new military coup led to the creation of a nationalist government that took direct control over important sectors of the economy. This included Itabira Iron Ore, which was split into two Brazilian-owned companies. In 1942, after the Brazilian government signed an agreement to supply iron ore to the Allied war effort, the government created the Companhia Vale do Rio Doce (CVRD, which in 2007 it shortened to Vale). After the war ended, Vale continued to expand its iron ore operations, and by the mid-1970s it was the largest exporter in the world. The company also moved into other sectors such as aluminum, coal, gold and chemicals.

With the end of military rule in the late 1980s, there were calls for the privatization of state-controlled operations such as Vale. The process did not proceed smoothly, in part because of resistance to the idea of foreign ownership, especially for Vale, which was known as the country’s “crown jewel.” Vale finally went private in 1997 in a sale to a consortium led by Brazilian steelmaker CSN.

Before long, Vale was wheeling and dealing alongside the other global mining giants. In 2004 there were reports that it was seeking to obtain a controlling stake in the Canadian mining group Noranda. That did not pan out, but amid takeover turmoil in the Canadian mining industry in 2006 Vale prevailed over Phelps Dodge and Teck Cominco in its US$19 billion bid for nickel giant Inco. This is said to be the largest corporate takeover ever carried out by a company based in Latin America.

In early 2008 Vale made an even bolder move by initiating negotiations for a takeover of Swiss mining giant Xstrata. However the deal, which reportedly could have cost as much as US$90 billion, fell apart after a few months.

In 2010 Vale agreed to sell its Brazilian aluminum assets to Norsk Hydro.

Financial information
Stock ticker symbol: 
VALE (Sao Paulo)
Fiscal year: 
2007
Fiscal year: 
2007
Major lines of business/segments: 

Ferrous products – Vale is the world’s largest producer of iron ore. In 2007 it had record production of 296 million metric tons of ore along with about 18 million metric tons of pellets. The company has extensive operations in its home country of Brazil including railroads, ports and terminals. Manganese mining and ferroalloys are also included in this segment.

Non-ferrous – This sector includes the extensive nickel operations acquired through the 2006 takeover of the Canadian company Inco (now known as Vale Inco). In 2007 the company produced about 248,000 metric tons of finished nickel as well as 248,000 metric tons of copper. Apart from Canada, Vale Inco has significant nickel mining operations in Indonesia and the South Pacific island of New Caledonia.

The company also owns coal assets in Australia and China, and steel assets in Brazil, South Korea and the United States (50% of California Steel Industries).

Sources
Watchdogs and related campaigns: 
Mining Watch Canada
Mines and Communities
ICEM (International Federation of Chemical, Energy, Mine and General Workers' Unions)
United Steelworkers Canada