* Nickel, coal production rise from year ago
* Copper, cobalt production reach record levels
* Higher prices may ease impact of iron ore decline
RIO DE JANEIRO, April 17 Iron ore output at
Brazilian global miner Vale SA, the world's largest
producer of the main steel ingredient, fell 3.5 percent in the
first quarter on declining ore quality and license delays at old
mines, the company said on Wednesday.
The impact of falling iron ore output was eased by rising
production at new and much-delayed projects in Brazil, Canada,
Australia and New Caledonia, Vale said in a securities filing.
Nickel and coal output rose and Vale recorded record levels
of copper and cobalt production.
Vale has been investing heavily in recent years to reduce
its dependence on iron ore which accounts for nearly 90 percent
of its profit.
Iron ore output was 67.5 million tonnes, 3.5 percent less
than a year earlier and 21 percent below the fourth quarter.
Reserves of high quality ore are falling in the company's oldest
and most important mining district in Brazil's southeastern
state of Minas Gerais, Vale said. Also, new equipment to
concentrate ores are not yet ready.
"The first quarter is the weakest of the year as operations
are affected by the Southern Hemisphere rainy season," Vale
The Rio de Janeiro-based company also faced licensing delays
that slowed the opening of new areas in old mine sites that the
company needs to maintain output volumes, Vale said.
The impact of the output declines, though, is likely to be
limited by higher average prices for the essential raw material.
It takes about 1.5 tonnes of iron ore to make each tonne of
At $148.23 a tonne, the average price of iron ore was 4.5 percent higher than a year earlier and 24
percent higher than in the fourth quarter. Combined with
cost-cutting efforts, higher prices could ease the decline in
output and bolster profit. Vale plans to release its
first-quarter financial statement on Wednesday, April 24, after
the markets in Sao Paulo and New York close.
Iron ore hit a three-year low on Aug. 30 of $88.70 a tonne,
a sign of slowing global demand for minerals and metals that
prompted the imposition of "rigid discipline" on spending by
Chief Executive Officer Murilo Ferreira. Three months later Vale
slashed planned capital spending 24 percent to $16.3 billion in
2013 from $21.4 billion in 2012.
Higher than average iron ore prices and spending cuts have
had little positive impact on Vale's share price, which fell to
33-month lows this week.
Still, efforts to cut spending on diversification away from
iron ore come just as expansion into nickel, copper and coal are
starting to show results.
"Vale's production in the first quarter of 2013 was marked
principally by the strong operational performance of base
metals," the report said.
NICKEL, COPPER RISE
First-quarter nickel output rose 3 percent to 65,000 tonnes
from a year earlier and rose 1.7 percent from the previous
quarter. Vale is the world's No. 2 producer of nickel, a metal
used to make steel rust-resistant.
Output was pushed higher by new production at its Sorowako
mine in Indonesia, its VNC unit on the French Pacific Island of
New Caledonia and at its Voisey's Bay project in Canada.
These allowed nickel output to grow even as production fell
at its flagship mine in Sudbury, Canada, and its new Brazilian
mine at Onca Puma in Brazil's Amazon.
"Improvements in the reliability of operations in Canada and
the ramp-up of VNC more than compensated for the loss in output
at Onca Puma and closure of a furnace at Sorowako," the
Nickel prices, though, have not held up as well as iron
ore. The average price in the first quarter was 2 percent
more than in the fourth quarter of 2012 but 10 percent below the
average for the year-earlier quarter.
Copper output rose 22 percent from a year ago to a record
90,000 tonnes and was 10.5 percent higher than in the fourth
quarter. Copper, a reddish metal, is a key component in
electrical and electronic equipment.
Output was aided by the ramp-up of production at the Salobo
I copper-gold project in Brazil's Amazon. Salobo, which has
suffered delays and technical problems, functioned at 65 percent
of capacity in the quarter, Vale said.
Cobalt, a subproduct of Vale's nickel output, also reached a
record, rising 68 percent in the quarter to 993 tonnes from a
year earlier and 71 percent from the fourth quarter.
Output of metallurgical or coking coal, used to make steel,
rose 22 percent to 1.37 million tonnes in the quarter compared
to a year ago, but was down 6.6 percent from the fourth quarter.
Declines from mines in Mozambique, the result of rains, were
offset by rising output from Australian coal mines.