NEW YORK (TheStreet) --Shares of Vale SA (VALE) are falling by 7.68% to $2.35 on heavy trading volume on Tuesday afternoon, as the metals and mining company drew down $3 billion from a revolving credit line in order to pay debt due this quarter, Reuters reports.
The move highlights the iron ore and iron ore pellets producing company's weak finances amid a low commodity price market as asset sales falter.
Analysts are expecting the Brazil-based company to suffer a shortfall of cash in 2016, Reuters added. The company took the draw down to delay the closing of a deal announced in 2014 to sell a stake in its Mozambique coal project to the Japanese trader Mitsui & Co.
The closing will depend on the securing of project financing for the coal mine and the connecting of rail and port, Reuters noted. This is something the companies have not yet been able to achieve.
Vale was looking for up to $2.7 billion in project financing when the deal was first announced.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate VALE SA as a Sell with a ratings score of D. 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, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.