January 30, 2018 / 6:55 PM / 10 months ago

Vale diversifies away from iron ore despite strong China demand: CEO

The logo of Brazilian mining company Vale S.A.'s is seen in the main entrance of B3 before the ceremony of company's inclusion in Brazil's listing market segment called Novo Mercado at B3 in Sao Paulo, Brazil December 22, 2017. REUTERS/Paulo Whitaker

SAO PAULO (Reuters) - Continued Chinese efforts to reduce pollution will boost demand for Vale’s high quality iron ore, the Brazilian miner’s chief executive said on Tuesday, even as the world’s top iron ore producer seeks to diversify away from the metal.

China’s aggressive campaign to clean its skies by clamping down on polluting steel mills has fueled a need for high-grade iron ore to boost productivity and limit emissions, opening the door wider for suppliers of better quality ore to the world’s biggest buyer.

“I cannot imagine China going back on the pollution controls it is trying to put in place,” CEO Fabio Schvartsman said at an event in Sao Paulo. “They will do everything possible ... to check pollution, which guarantees their demand.”

Nevertheless, Schvartsman said the company will seek to reduce the percent of earnings derived from iron ore from the current 90 percent to around 70 percent within two years.

“The company is beginning to become truly diversified,” Schvartsman said, adding that base metals would be a fundamental part of the diversification strategy.

Schvartsman also said a recent rise in nickel prices should generate an additional $750 million in cash flow and that the company expected to reach its $10 billion net debt target by the middle of year.

A Vale executive said earlier this month that company could reach its net debt goal of $10 billion before the year end.

Reporting by Luciano Costa and Tatiana Bautzer; Writing by Alexandra Alper; Editing by Diane Craft and Marguerita Choy

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