Canaccord Adams Maintains 'Buy' Rating on VALE (RIO), but Lowers Price Target

October 10, 2008 1:35 PM EDT

Canaccord Adams maintains a 'Buy' rating on VALE (NYSE: RIO), but lowers target to $24.25 from $43.

Canaccord analyst says, "In light of a deteriorating global economic environment, we have lowered our commodity price forecasts across the board. For 2009, we are assuming roll-over for iron ore, but are reducing our Vale sales volumes forecasts by 10%. While it is not entirely clear that benchmark iron ore prices will come down, current benchmark prices May only hold at the expense of volumes. For 2009, we are now using US$6.50/lb for nickel, US$1.00/lb for aluminium and US$2.00/lb for copper...Vale is scheduled to release Q3 financial results on October 23. We are expecting adjusted EPS of C$0.81 and adjusted EBITDA of US$6.91 billion. However, we note that currency translation is likely to a large negative adjustment to EPS. We very tentatively estimate an EPS adjustment of (US$0.24) due to the 16% depreciation of the Brazilian real against the US$. We also highlight iron ore volumes risk, as the impact of lower Chinese demand is unclear. We forecast Q3 iron ore sales of 74.0 million tonnes."

Companhia Vale do Rio Doce (Vale) is a metals and mining company. The Company is also a producer of iron ore and iron ore pellets.

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