#RBC raised Vale's recommendation from Sector Perform to Outperform, stating that delays in the Simandou iron ore project will keep prices higher for longer, positioning the Brazilian miner as one of the main beneficiaries.
The brokerage raised its price target to US$ 14.20 per ADR, up from US$ 11 previously.
Iron ore is expected to remain at US$ 100 per ton during the first half of next year, before falling to US$ 95 by the end of 2026. RBC also raised its long-term forecast for iron ore from US$ 75 to US$ 85, due to industry cost inflation.
The commissioning of the Simandou mine is likely to face challenges related to geology and a complex multimodal infrastructure system, leading the brokerage to extend its assumed ramp-up period from 30 to 48 months. This pushes more supply into the future and raises RBC's average iron ore price forecasts for 2026 to 2029 by about 13%.
According to RBC, Vale stands out as a clear winner in this scenario because its high-grade iron ore products, including IOCJ, would command higher premiums with fewer competing tons coming to market.
The brokerage added that the lower availability of low-alumina ore will also increase premiums for Vale's products, leading RBC to raise its premium assumptions for 2026 to 2029 by about 6%.
Higher price forecasts result in a 6% increase in Vale's expected average EBITDA for 2025 to 2027, an 11% rise in EPS, and a 15% increase in cash flow.
With the reduction of remediation payments and the growth of base metals volumes, RBC projects that Vale's free cash flow yield will be approximately 9% in fiscal year 2026, compared to about 4% for peers.
The brokerage also expects the company to complement a net debt repayment of US$ 15 billion.
