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Renewable Energy in the Mining Industry

Written By Brian Hicks

Posted May 11, 2009

What would a multinational steel producer be doing at a major renewable energy conference?

And why does it matter to you as an investor?

Well, the fact is clean energy is a moneymaking and money-saving proposition these days. Plain and simple.

And Brazil’s biggest energy consumer has had enough of global fuel price volatility hitting its profit margins. . .

So Vale (NYSE:VALE), South America’s steel champion, is moving in sync with the national stream towards self-sufficiency in power supply.

At the Renewable Energy Finance Forum in Rio, I got a first-hand update from government and industry officials about just how inclusive the Brazilian alternative energy rollout has become.

Niche market? Not by a longshot. Decades of experience in renewables sets Brazil up for a wide-ranging win again.

The Brazilian government is going from success to success with its ProAlcool sugar ethanol program and the newer ProInfa clean electricity generation plan. An overarching strategy, ProInfa includes Brazilian wind energy, solar power, and even some "clean coal" technology to clean up the grid while expanding capacity.

That has prompted Vale to take a huge step forward in making biomass, sugar ethanol, and other Brazilian resources part of their operational mix.

As a company, this tectonic shift in increasing shareholder value and reducing marginal costs requires a whole new business segment — Vale Energy Solutions.

Vale Energy Solutions

Headed by longtime Vale exec James Pessoa, VSE (by its Portuguese acronym) is a cooperative effort between Vale and the Brazilian government’s development bank, BNDES.

BNDES first came into existence to help finance the construction of Brasilia, the country’s meticulously planned capital that rises above Brazil’s interior plains.

Now, BNDES is a highly successful government arm that helps businesses from corner markets, and even market titans like Vale, grow responsibly.

And in today’s ultra-tight financing environment, BNDES is stepping in while many banks can’t free up capital to fund smart growth projects.

I found out about the venture at the Renewable Energy Finance Forum this April in Rio, and frankly, I was surprised.

For Vale, national incentives give the company’s board an excuse to do major long-term cost-cutting on favorable financing terms.

For Vale shareholders, this immediately becomes an investment green light.

Vale Leads the Mining Industry into Renewable Energy

Vale isn’t the only mining giant on the Brazilian map.

Brazilians are well aware of their resource endowment. Like Argentina (named for silver), the very place names you hear around Brazil point to major metals and their historical role.

One of the largest cities in Brazil is Minas Gerais (translation: General Mines), and like many South American countries, the government has a Ministry of Mines and Energy. Not Energy and Mines, mind you. . .

The industrial order of operations in this continent, which Europeans first conquered for its gold and silver, still has metals on top.

And while Vale is at the top of all Brazilian energy consumers and the country’s massive mining industry, plenty of players stand to gain from Vale’s pioneering energy progress.

Investing in Flexfuel Mining

Gold miners with operations in Brazil dot North American stock exchanges, especially in Canada where the Toronto and Vancouver trading boards are full of budding energy opportunities.

My colleague Luke Burgess has a list full of Canadian-traded resource stocks and a Blackberry full of contacts to find out who’s doing what when it comes to Brazil’s clean energy mining boom.

In fact, after I briefed Luke on the weight of Vale’s advance into clean energy just the other day, Luke got right down to updating a special report he issued to Secret Stock Files subscribers. It’s a portfolio’s worth of plays on Brazil’s natural gold endowment, the Guiana Shield. Luke has optimized it to include only the best companies that will follow Vale’s path to success.

To learn more about Secret Stock Files and get your report right away, click the link below:


Sam Hopkins