NEW YORK (TheStreet) -- Vale (VALE) - Get Report stock closed lower by 0.76% to $5.23 on Friday afternoon, after a Brazilian court ordered the company to halt operations at its nickel mine in the Amazons, Reuters reports.
Operations at the Onça Puma nickel mine, in the Pará state, faced regulatory scrutiny and protests seeking compensations, such as healthcare and better schools, for the indigenous communities in the region.
The court ordered Vale to give $287,000 for each village in the area until it creates a compensation program, Reuters added.
Vale's mining license in the area requires the company to provide environmental and other compensations to the native communities.
The company, however, said that many of the demands are the responsibility of the federal and state governments in Brazil, Reuters noted.
The nickel mine in Pará produced about 8.8% of Vale's output for finished nickel in the second quarter of this year.
Separately, TheStreet Ratings team rates VALE SA as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate VALE SA (VALE) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Metals & Mining industry and the overall market, VALE SA's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to $996.00 million or 78.32% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- VALE's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 60.18%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- VALE SA has improved earnings per share by 17.9% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, VALE SA increased its bottom line by earning $0.13 versus $0.01 in the prior year. For the next year, the market is expecting a contraction of 276.9% in earnings (-$0.23 versus $0.13).
- VALE, with its decline in revenue, underperformed when compared the industry average of 16.2%. Since the same quarter one year prior, revenues fell by 29.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full analysis from the report here: VALE Ratings Report