Brazil's Vale Agrees To Pay Around $9.58 Bln In Tax Settlement

(RTTNews) - Brazilian mining giant Vale S.A. (VALE) said Wednesday that it has agreed to participate in the federal tax settlement, and pay the Brazilian government around 22.325 billion Brazilian reais or about $9.58 billion in total. The company noted that the tax payment will have an estimated impact of 20.725 billion reais or about $8.89 billion on net income in 2013.

Under the settlement, the iron-ore producer will pay 5.965 billion reais at the end of this month and 16.360 billion reais in 179 monthly installments, adjusted by the Central Bank of Brazil policy interest rate or SELIC. Vale estimates that the net present value of the tax payments is 14.425 billion reais.

The agreed payment relates to Brazilian corporate income tax and social contribution on the net income of its non-Brazilian subsidiaries and affiliates from 2003 to 2012.

In October, the Brazilian government launched a tax-amnesty program, Refis, which offered Vale and other companies a discount mainly on the interest and fines.

The company noted that the total amount of tax contingency for the period from 2003 to 2012, including some years for which assessments were not issued to Vale or its subsidiaries, was estimated at 45 billion reais. This includes 17.084 billion reais of principal, 9.831 billion reais of penalties, 11.991 billion reais of interest and interest on penalties, and 6.094 billion reais of statutory fees.

Vale Chief Executive Officer Murilo Ferreira stated, "The proposed terms have allowed for a considerable reduction in the amounts in dispute, and the decision to participate in the REFIS is consistent with our goal of eliminating uncertainties and directing managerial focus on Vale's businesses."

The company said it will fund the tax payment by operating cash flow, not requiring additional indebtedness, and not causing significant changes in financial planning.

Vale said that in future years, its financial expenses will include the interest charges of the REFIS payments. The impact on future cash flows will stem from the monthly installments. Vale shares closed Wednesday's trading at $14.76, up $0.04 or 0.27 percent. In the after hours trading, shares gained $0.34 pr 2.30 percent further, and traded at $15.10.