(Bloomberg) -- Vale SA picked finance head Gustavo Pimenta to replace Eduardo Bartolomeo as chief executive officer of the Brazilian mining giant in January, bringing an end to a messy succession process.
Pimenta, who has been Vale’s chief financial officer since November 2021, beat out 14 other external candidates to land the top job at the Rio de Janeiro-based company. He succeeds Bartolomeo, who was the top executive for five years after stepping in to help recover Vale’s reputation following Brazil’s deadliest mining disaster in January 2019.
Monday’s board announcement ends a months-long process that dogged the world’s second-largest iron ore supplier in its efforts to find its next leader. The turmoil included government interference attempts, information leaks and quarrels among board members — two of whom resigned. Bartolomeo wanted to keep the job, but he couldn’t gather enough support.
“It is certainly a name that pleases the market, but the main point is the confirmation that there is no political interference in Vale’s succession,” said Tiago Cunha, an equity manager at ACE Capital.
Vale rose as much as 3.1% in Tuesday trading in Sao Paulo, while the company’s American depository receipts rose as much as 1.9% in New York.
Pimenta, 46, called for intensifying dialogue with all stakeholders while prioritizing the safety of people, Vale’s operations and the environment, he said in Monday’s statement.
The incoming CEO has 20 years experience in the financial, energy and mining sectors. Pimenta joined Vale as CFO nearly three years ago. Before that, he spent more than a decade at US power company AES Corp. and was previously a vice president of strategy and mergers and acquisitions at Citibank in New York.
As Vale’s finance head, he helped guide the separation of the company’s base metals business — including a deal to sell a stake to Saudi investors — while pursuing cost efficiencies and defining a strategy to curb greenhouse gas emissions by a third by 2030. The executive has also been at the forefront of ongoing negotiations with the Brazilian government on issues tied to settlements from mining disasters and the railway concessions.
Iron Ore
Pimenta will face challenges when he takes the helm. Iron ore — the source of 90% of Vale’s profits — is slumping, driven down by weakening Chinese steel demand. Even with improving performance at its mines, the company will need to adapt to iron ore prices that are less than half the record levels of 2021. The steelmaking ingredient is one of the year’s worst performing major commodities, slumping nearly 30%.
The uncertainty among the succession had weighed on investors in Vale, whose stock is trading at a discount to peers. The company is still dealing with repercussions from a 2015 tailings dam disaster in southeast Brazil and a dispute with the federal government over the concession renewal for a railway in Carajas, where Vale has its most prized operations.
Solving these overhangs will be Pimenta’s two main tasks in the short term, Itau BBA analysts wrote in a note to clients. The firm said an internal replacement was the best option to fast-track ongoing negotiations and limit changes in Vale’s strategy. From an operating standpoint, the analysts said the next CEO will likely focus on improving reliability of iron ore operations in Brazil’s north.
Board Decision
A key criteria for choosing Vale’s next boss was their ability to navigate institutional relations. Brazilian President Luiz Inacio Lula da Silva has been criticizing Vale for rewarding investors with dividends while selling assets, sitting on mining rights and taking too long to compensate victims of its mining disasters. While Vale was privatized in 1997, government assent is key to cutting through the red tape that’s hobbling its ambitions.
Pimenta’s unanimous approval at Vale’s board shows that his name is palatable to investors and the government, according to a statement from Andre Viana, a workers’ representative on the board who took part in the negotiations.
The board appointed Pimenta after analyzing a list of 15 names prepared by consultancy Russell Reynolds and short-listing to three candidates. The new CEO will be officially presented to investors at Vale’s annual investor day on Dec. 3. Bartolomeo will support the CEO transition process and will remain as a company adviser until December 2025.
--With assistance from Leda Alvim.
(Adds shares and analysts comments from fifth paragraph.)
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