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Roger Agnelli speaks during the Reuters Latin America Summit in Rio de Janeiro March 28, 2006. (Sergio Moraes/Reuters)
Roger Agnelli speaks during the Reuters Latin America Summit in Rio de Janeiro March 28, 2006. (Sergio Moraes/Reuters)

Vale confirms CEO Agnelli's exit Add to ...

The ouster of Roger Agnelli as chief executive officer of Brazilian mining giant Vale SA signals a tightening government grip on the country's resource sector and heightens concerns over rising political risk in Latin America's largest economy.

Rio de Janeiro-based Vale confirmed a search is under way to replace Mr. Agnelli, who has held the top job at the world's largest iron ore producer for the past decade.

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Vale said its controlling shareholder Valepar, majority held by the Brazilian government, hired a headhunting firm to find a replacement for Mr. Agnelli, 51, when his mandate ends in May. Valepar will hold shareholder meetings next week to nominate a new CEO from a list of three candidates, Vale said.

Toronto-based metals executive director Tito Botelho Martins, 47, is seen as the leading candidate to replace Mr. Agnelli. Mr. Martins, who came to Canada from Brazil in 2009, heads the company's Canadian mining operations picked up in the global bidding war for Inco in 2006.

The departure of Mr. Agnelli confirms weeks of speculation that the socialist government, under its new President Dilma Vana Rousseff, was demanding change at the top of Brazil's second-largest resource firm. Brazilian officials are said to be unhappy that Vale, a former state-run company until it was privatized in 1997, was not investing more in the country, particularly in steel production.

The standoff marks the latest in series of battles between governments and miners over how to best profit from a country's resources. Many countries such as Chile and Australia are turning to higher taxes as a way to squeeze more from miners, particularly as prices soar for commodities such as copper, coal and iron ore alongside increased demand from rapidly industrializing nations, notably China.

Vale has increased iron ore exports to China and chose to build some of its ships in Asia, instead of at home in Brazil. The bad blood between Mr. Agnelli and the government reportedly dates back to 2008 when Vale laid off workers and cuts its investment budget in response to the global financial crisis.

Still, Vale's strategies have helped it grow from an iron ore miner with annual revenues of $4.1-billion (U.S.) in 2002 to a diversified miner with revenues of $46.5-billion in 2010, according to figures from BMO Nesbitt Burns.

While Vale is the least diversified of the big miners such as BHP Billiton Ltd. and Rio Tinto PLC, it has a "robust pipeline of growth projects" across the major industrial commodities such as iron ore, copper and nickel, BMO analyst Tony Robson wrote in a recent report.

"A change at the top could mean a change in the company's growth strategy," Mr. Robson wrote.

"The short-term impact to the estimated valuation is expected to be minimal, with potentially negative ramifications long term if investment decisions are taken based on a nationalist agenda."

The confirmation of Mr. Agnelli's departure comes a week after he released a statement saying any change to the CEO role is "exclusively the decision of the company's controlling shareholders."

Mr. Agnelli also attempted to distance himself from the politics of the situation: "What I have been doing lately is what I have done throughout my entire career: working. I have no involvement in any political matter related to this issue," he said in a March 25 statement.

Follow on Twitter: @BrendaBouw

 
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