Vale to invest $21b in 2012, down from $24b

RIO DE JANEIRO: Brazilian mining conglomerate Vale, the world s top iron producer and which has its pelletisation plant at Sohar in Oman, announced yesterday investments of $21.5 billion for 2012, including 60.5 per cent for project execution.

It said the investment budget package also includes $2.4 billion (11 per cent) for research and development and $6.1 billion (28.5 per cent) for sustaining existing operations.

"Based on a long-term view of global minerals and metals markets, the budget is aligned with our vision of becoming the best global natural resources company in long-term-value creation," the company said in a statement.

It said $918 million would be allocated to fund the global mineral exploration programme, $848 million for conceptual, pre-feasibility and feasibility studies and $591 million for investment in new processes, technological innovation and adaptation.

The investment plan for 2012 is sharply down from the $24 billion projection announced for 2011, Vale said, noting that the actual figure at the end of this year should be around $19 billion.

Vale s new chief executive Murilo Ferreira, who took over from Roger Agnelli in May this year, said the lower projections were due to a change of methodology as the company now considers only projects that have received government environmental licensing.

In an online press conference from New York, he said Vale s investments have however increased steadily since 2009 when they reached $9 billion.

Jose Carlos Martins, Vale s executive director for ferrous minerals, meanwhile said lower demand for iron ore from leading consumer China this year should be corrected next year.
"There is no structural crisis in China. The expectation is that the market will show sign of greater strength in late January," he added.

Price of iron
Martins said Vale hopes that the price of iron will not fall below $120 per tonne next year, particularly since 'Chinese demand should recover and Europe should stabilise'.

Vale s ordinary shares were up 2.10 per cent to $22.74 yesterdday, while preferential shares rose 2.18 per cent to $21.43 on the Sao Paulo bourse. Vale said its mineral exploration programme would involve initiatives in the Americas, Africa, Asia and Australasia.

It said expenditures would be earmarked to boost reserves of iron ore ($282 million) and nickel ($202 million) and explore opportunities in copper $156 million), coal ($75 million) and potash and phosphate rock ($50 million).

Among key challenges for the mining industry next year, Vale cited environmental licensing, human capital constraints, cost pressures and longer lead times.

In the third quarter of 2011, Vale posted a net profit of $4.9 billion, down 23.5 per cent from the previous quarter due to a sharp appreciation of the real in relation to the dollar during the year.

Last year, the Brazilian company achieved the best results in the history of the global mining industry last year, with net profits of $17.3 billion. Its business volume reached $46.4 billion and its production rose 29.4 per cent to 308 million tonnes of iron ore.

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