Brazil's Vale SA to scale back investment as global economy bites
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Brazil's Vale SA , the world's second-largest mining company, cut estimated 2013 capital spending by 24 percent after a global slowdown and a drop in iron ore prices led the company to rethink expansion.
The retrenchment comes after sluggish growth in the United States, China and Europe diminished demand for metals and weighed on the price of iron ore, Vale's main product. Iron ore , a key ingredient in steel, fell to a three-year low in September, and is currently hovering around $115 a tonne. Vale forecasts a $110-$140 a tonne range in the coming year.
Vale will invest $16.3 billion in 2013, down from the $21.4 billion budgeted this year for new projects, research and development and to maintain existing mines and plants, according to a regulatory filing on Monday.
"The outlook for slower expansion of global demand for minerals and metals in the medium term requires rigid discipline in the allocation of capital and greater focus in maximizing efficiency and reducing costs," the company said in the statement. Vale's 2013 investment plan is the smallest since 2010. Among cuts, Vale confirmed the removal of its Simandou iron oremine in Guinea, and the Samarco IV pellet plant with Australia's BHP Billiton Plc in Brazil from the list of active
projects. BHP and Vale each own half of the Samarco mine, slurry pipeline, pellet production and port project. The Lubambe copper mine in Zambia was removed from the project list after output successfully started, Vale said. The mine is a joint venture with African Rainbow Minerals and Zambia Consolidated Copper Mines Ltd.Vale is also considering selling its 22 percent stake in
Norwegian aluminum group Norsk Hydro, Chief Financial Officer Lucianao Siani said.
Vale obtained the stake when it sold its aluminum business to Norsk in 2010. The agreement requires Vale to hold the stock until February 2013, although the company is eager to divest non-core assets.