PREVIEW-Brazil miner Vale's profit to show 70 pct drop-poll

* Miner Vale's Q3 profits to drop on crisis impact

* Earnings to rise from Q2 on higher iron prices

By Brian Ellsworth

RIO DE JANEIRO, Oct 26 (Reuters) - Brazilian miner Vale
will report a 70 percent plunge in third-quarter earnings
because of lower iron ore prices and declining overall output,
according to a Reuters poll of analysts.

Vale (VALE.N)(VALE5.SA), the world's largest iron ore
miner, will post net profit of $1.45 billion when it reports
earnings on Wednesday after markets close, according to an
average of six analysts' estimates. That would be down from
$4.82 billion a year earlier.

The results largely reflect the massive slump in global
minerals markets following the 2008 financial crisis. Iron
demand has recovered over the last three months as steel
production picks up, but is still off its pre-crisis peak.

The average estimate shows profit up 84 percent from
second-quarter earnings of $790 million.

Spot prices for iron ore, the company's principal revenue
driver, rose slightly from the second quarter on renewed
exports to both China and Europe as steel mill demand picked up
amid hopes the world may be emerging from recession.

"Results should be mainly driven by 1, iron demand recovery
outside China ... and 2) higher iron ore spot price, up 10
percent in the quarter," Merrill Lynch said in a research note,
referring to quarter-on-quarter results.

Last week, Vale announced a $12.9 billion investment budget
for 2010, up from this year's planned outlays of $9 billion
after heavy pressure by President Luiz Inacio Lula da Silva.

Lula has harshly criticized the company for not investing
enough in Brazil to boost economic development and not helping
to spur the country's steel industry.

Some analysts see a political risk of growing government
intervention in company management, although markets have
largely shrugged off the tensions between Vale and Lula. Vale's
stock has outperformed its peers and the Brazilian index over
the quarter.

Vale shares were up 0.4 percent at 41.18 reais in early
afternoon trading on Monday.

The analysts on average predicted net revenue of $6.21
billion and EBITDA, a key measurement of cash flow, of $2.50
billion.

In June, Vale cut prices as much as 48 percent to customers
in Europe and Japan, but never completed a price agreement with
China under the traditional benchmark system and continues to
sell on the spot market there.

The annual talks between China and major global miners
Vale, BHP Billiton (BHP.AX) and Rio Tinto (RIO.AX) came under
strain following China's arrest of Rio employees on charges
that they stole state secrets. Rio denies any wrongdoing.

F'CAST 2009 2009 2008 CHANGE

3RD QTR 2ND QTR 3RD QTR YR VS YR
Net Revenue $ 6.21 bln $ 5.08 bln $ 12.12 bln -49 pct
EBITDA $ 2.50 bln $ 1.73 bln $ 6.37 bln -61 pct
Net Profit $ 1.45 bln $ 790 mln $ 4.82 bln -70 pct