Controlling shareholders of Valepar, the investment group that controls Vale, the world's second largest mining company, meeting in São Paulo, Brazil Monday night, voted to replace Roger Agnelli as chief executive officer of Vale with Murilo Ferreira, who will rejoin the company.
The announcement of the choice of Ferreira was made initially in a regulatory filing. Vale - which operates in 20 countries - is the world's largest hard metal producer and second-largest nickel producer. Russia's OAO Norilsk Nickel is the world's largest nickel producer. About 75 percent of Vale's nickel production comes from Canada. Vale is the world's largest iron ore miner and Brazil's number one exporter.
Last Nov. 17 Vale announced plans to close the Thompson smelter and refinery by the end of 2015, cutting 500 positions - approximately 40 per cent of its local workforce - worth an estimated $65 million to their payroll.
Ferreira, 58, was chief executive officer of Vale Inco, currently known as Vale Canada, in Toronto and executive director of nickel and base metals sales of Vale when he left the company for personal reasons at the end of 2008 and was replaced by Tito Martins. Vale dropped Inco from its name last May 27 and its global nickel business is simply known now as Vale. It had operated around the world as Vale Inco since Companhia Vale do Rio Doce initially (CVRD) re-branded itself Nov. 29, 2007. "Vale" is pronounced (vah-lay) and literally means "valley" in Portuguese.
Ferreira served almost two years as the top Vale official in Canada, starting when the Brazilian mining giant finalized its purchase of Inco in January 2007. He had originally joined Vale in 1977. In 1998 he was appointed executive officer of commerce and finance at Vale do Rio Doce Alumínio S.A.-ALUVALE, a holding company of Vale that was merged into Vale in December 2003. Much of his experience is in aluminum and ferroalloys.
Ferreira takes over as head of Vale May 22 when Agnelli leaves the post as his mandate expires.
"The nomination is subject to approval of Vale's board of directors, in a meeting yet to be announced," said Cory McPhee, vice-president for corporate affairs with Vale Canada in Toronto. The approval of Vale's board of directors of Ferreira's appointment as CEO is expected to be a largely a formality.
Martins, who is still president and chief executive officer of Vale Canada and executive director of base metals for the international parent company, was passed over for the top job in Brazil in favour of his predecessor in Canada, Ferreira.
Martins has been part of an eight-member worldwide executive management team headed by Agnelli. Other members of that team include Jose Carlos Martins, Vale's executive director for marketing, sales and strategy; Carla Grasso, Vale's executive director for human resources and corporate service; Eduardo de Salles Bartolomeo, executive director of integrated bulk operations; Guilherme Perboyre Cavalcanti, Vale's executive director for finance and investor relations and chief financial officer; Eduardo Ledsham, executive director for exploration, energy and projects management; and Mario Alves Barbosa Neto, executive director of Vale's new fertilizers division.
Martins was appointed as president and CEO of its Vale nickel subsidiary in December 2008. He has worked for Vale since 1985. Martins said during a Jan. 26 visit to Thompson that he does not believe the Dec. 3, 1956 founding agreement between the province and the company, then known as Inco, which created the first fully-integrated nickel operation complete with ore processing, binds the company to continue that operation now. The province has suggested in "spirit" the agreement should bind Vale to continue the 50-year-old operation that gone underway when the Thompson Nickel Complex officially opened on March 25, 1961.
Manitoba delegations, made up of USW Local 6166 President Murray Nychyporuk and assorted Thompson politicos, including Mayor Tim Johnston and Thompson NDP MLA Steve Ashton, who is also minister of infrastructure and transportation, have met in Toronto twice with Martins and senior Vale Canada officials on Feb. 14 and last Nov. 24 to suggest counter-proposals to keep the refinery and smelter open here beyond 20015. Last Dec. 7, Martins led a four-person Vale corporate delegation to Thompson where they met with key community stakeholders.
While Vale asked for some technical clarifications on some of the Manitoba delegation's counter-proposals after the Feb. 14 meeting in Toronto - which they have received - nothing has changed to date in a substantive sense from when the closure was announced last Nov. 17.
Manitoba Operations is expected to produce about 75 million pounds of plating grade nickel this, well down from 130 million pounds a year not long ago.
About 1,250 United Steelworkers Local 6166 workers here at Manitoba Operations in Thompson inked their last three-year collective agreement with Vale Sept. 15, 2008 - the very day Wall Street investment bank Lehman Brothers collapsed. Workers voted 65.5 per cent in favour of the contract, which included wage increases in each year of the agreement consistent with their last contract, and pension improvements. That agreement expires in just over five months on Sept. 15.
Valepar SA, the company that controls Vale, is owned by Previ, the employee pension fund of state-controlled Banco do Brasil SA; Bradespar SA, an industrial holding company; Mitsui & Co, Japan's second-largest trading company; BNDES Participações SA, or BNDESpar, and Elétron.
Created on June 1, 1942 by Brazilian dictator Getulio Vargas, Vale was privatized on May 7, 1997. Vargas created Vale in 1942 to supply steelmaker Siderúrgica Nacional as part of a drive to industrialize the country. The controlling shareholders of Valepar are Litel, Bradespar, BNDESpar, Mitsui and Elétron.
BNDESpar is a subsidiary of the Brazilian state-owned development bank. In addition to the BNDESpar stake and the ruling Workers Party's ties to the pension funds' management, the Brazilian government owns 12 so-called "golden shares" in Vale that gives it veto power over corporate decisions.
The golden shares stem from the 1997 privatization of Vale. When golden shares come into play, a government or other entity holding them maintains certain privileges, which secure a more favorable situation than the other shareholders.
Valepar is essentially a joint venture between state and private sector interests and holds about 53 per cent of Vale's voting capital. Previ and Funcef, the pension funds of state-run banks Banco do Brasil SA and Caixa Economica Federal, hold 49 percent of Valepar along with Petros, the retirement fund for government-controlled oil producer Petroleo Brasileiro SA. Previ controls Litel, while BNDESpar owns 11.5 per cent.
From the private sector, Bradespar SA, part of the Bradesco group owns 21.21 per cent of Valepar, and Mitsui & Co. Ltd. owns 18.2 per cent. While state-owned Litel and BNDESpar together have a majority stake in Valepar, a shareholder agreement means major decisions also require support from at least one of the two private-sector partners, Mitsui and Bradesco.
Tito Martins holds a bachelor's degree in economics from the Federal University of Minas Gerais (UFMG) and a master's degree in management from the Federal University of Rio de Janeiro (IEAD). He has attended other executive education programs at INSEAD's European campus in Fontainebleau in France, an hour away from Paris, and at the Kellogg School of Management at Northwestern University in Evanston, Illinois.
Valor Economico, a Portuguese-language newspaper, said March 24 that controlling shareholders would choose Tito Martins for the top job. Other possible replacements for Agnelli whose names have surfaced in recent months include Sergio Rosa, former Vale chairman, Fabio Barbosa, chairman of Santander Brasil and Wilson Brumer, chief executive officer of steelmaker Usiminas.
The departure of Agnelli, 51, for being at odds with the Brazilian government, particularly the ruling Workers' Party and former president former president Luiz Inácio Lula da Silva, as well as his successor, President Dilma Rousseff, who took office Jan. 1, had long been rumoured, although Vale denied as recently as Jan. 7 that Valepar was discussing a replacement for Agnelli. Rousseff, 63, is a one-time Marxist guerrilla who was tortured under the military regime and dictatorship of Emílio Garrastazu Médic. Rousseff was arrested in 1970 and imprisoned for three years for being part of an armed resistance group.
Vale has generally underperformed Brazil's Bovespa index and BHP Billiton Ltd. (BHP), the world's biggest mining company by market value since early January. But on March 31 Vale finally admitted Valepar was hiring international recruiters to help pick three possible candidates. O Estado de São Paulo newspaper said that Ferreira was hand picked by Rousseff herself, however, another Portuguese-language Brazilian newspaper, Folha de São Paulo, offers a very different and more nuanced explanation of why Tito Martins didn't get the nod and Ferreira did.
According to Folha de São Paulo, Rousseff decided to end the informal agreement between the government and Bradesco that guaranteed that the bank had the de facto choice for the chief executive of Vale, while Previ, the pension fund for employees of Banco do Brazil, appointed Vale's chairman of the board.
Faced with the disapproval of Rousseff, Tito Martins, widely considered the favorite and unilateral choice of Bradesco to succeed Agnelli, was out of the running for the top Vale job.
Rousseff, wanting to limit Bradesco's power in Vale, since it holds only 21.21 per cent of the shareholder control of Valepar, while the Brazilian government indirectly controls 60.5 per cent through Previ and the BNDES, decided that the choice to succeed Agnelli would have to be by consensus among the shareholders. His proximity to Agnellialso weighed against Martins, Folha de São Paulo reported.
"Murilo Ferreira was nominated by the controlling shareholders of Vale among a list of three candidates recommended by an international executive search company, according to the rules and bylaws of Valepar, the controlling shareholder of Vale," McPhee said April 5. "Consistent with the best corporate governance practices, there will be a transition period, from our current CEO, Roger Agnelli, to its successor, to ensure the continuity of the operations and strategy implementation of Vale."
Brazilian Mines and Energy Minister Edison Lobao said on Monday Vale needs to bring its investment policies more in line with Brazil's national interests. "The company needs to contribute more to Brazil's interests," said Lobao at an event in the capital city of Brasilia. To speed industrial development at home, the Brazilian government has long pressed for Vale to be more active in shipbuilding and steelmaking in Brazil. Agnelli faced government criticism for buying ships in China when Brazil was setting up its own shipyards.
Lobao cited the need for Vale to add value to the iron ore it mines by producing more steel in Brazil, which it can export in addition to iron ore, the minister said.
Agnelli's departure from Vale when his 10-year mandate finishes May 22 should be considered natural, the Brazilian government said. "There's nothing abnormal about his departure," Lobao said.
According to Veja, a Brazilian Portuguese-language weekly magazine, Silva mused last summer about the possibility of the Brazilian government taking control again of Vale.
Silva was said by Veja to have asked officials inside his government to find a way to ensure the government controls Vale through Previ and BNDES Participações SA, the investment arm of Brazil's state development bank, the São Paulo-based Veja said.
Vale fired 1,300 employees, said that 5,500 more would be put on paid leave and pared its investments by about half to $9 billion, from an announced $14.2 billion, during the global recession two years ago. The decision was criticized by Silva, who said the company had "no reason" to cut spending because it had "lots of cash" to help the domestic economy resume growth.
Vale posted a profit of $17.3 billion last year, which it said was the most ever for a mining company. It plans to invest a record $24 billion this year, about 64 percent of it in Brazil, as it seeks to boost iron-ore production to 522 million metric tons by 2015. The company budgeted 73 percent of its $11 billion investment in 2008 to Brazil, regulatory filings show.
Ferreira has a degree in Business Administration from Fundação Getúlio Vargas (FGV) in São Paulo, a post-graduate degree in Business Administration from FGV in Rio de Janeiro, and completed an executive education program in M&A at the IMD, Lausanne, Switzerland.
A former banker at Brazil's Banco Bradesco SA, Agnelli oversaw more than $84 billion in investments and acquisitions at Vale between 2002 and 2010, including the purchase of Inco here in Canada in January 2007 for $19.4 billion in a hostile all-cash takeover.
