NEW YORK (TheStreet) - While the big three mining giants provide bargaining opportunities on risk-adjusted performance, Vale (VALE - Get Report), in particular, looks more attractive on its reducing borrowing costs and impact of Australian taxes on BHP Billiton (BHP) and Rio Tinto (RTP).

One of the trends following iron-ore price hike is that China has been taking initiatives to reduce its excessive dependency on iron ore imports from the three mining giants.

In parallel, Vale has been reducing its reliance on China by expanding its shipments to other countries. In the first quarter of 2010, China accounted for 32% of Vale's revenues compared to the 45% revenues a year earlier. Lower exposure to China and diversification of export markets has helped Vale reduce its earnings volatility.

According to Bloomberg, Vale's 5.625% bonds due in 2019 yield 100 basis points more than similar-maturity notes from BHP. The difference in yield narrowed from 112 basis points on June 8. Vale's bonds yield around one basis point less than Rio Tinto's similar-maturity bonds. The spread narrowed from 36 basis points a month earlier.

Narrowing spread of Vale's bonds compared to BHP's and Rio's implies that for similar risk, investors now require lesser return from Vale than earlier, thereby reducing the borrowing costs of the company. Vale has 12 buy, 5 hold, and no sell ratings, according to TheStreet's Analyst ratings guide.

On concerns related to Australia's "super" profit tax, BHP and Rio are likely to delay iron ore expansion projects for a few more months. Both these companies started looking for investment opportunities outside Australia. For instance, last week BHP signed a $3 billion iron ore agreement with Liberia.

The delay in expansion projects of BHP and Rio will likely keep iron ore prices high. Analysts at Citigroup anticipate iron ore prices to average between $120 and $130 a ton for 2011 and 2012, respectively. For this year, iron ore spot prices are expected to be $114 per ton, according to analysts polled by Bloomberg.

Vale will likely benefit from high prices of iron ore, which accounts for around 60.8% of the company's revenues. We anticipate the company's stock to provide attractive returns over the next few quarters. Last week, UBS ( UBS) upgraded Vale to buy from neutral as the risk-reward profile looked compelling.

In addition to Vale, our base metal stock pick Cliff Natural Resources ( CLF - Get Report), South Africa's Kumba Iron ore and India's Sesa Goa will likely have a prominent role in the world's iron ore supply.