Vale Net Income Rises 22% on Record Iron-Ore Prices

August 7th (Bloomberg) – Cia. Vale do Rio Doce, the world’s biggest iron-ore producer, said second-quarter profit climbed 22 percent to the highest ever on record contract prices for supplies sold to steel producers.

Net income rose to $5.01 billion, or $1.02 a share, from $4.095 billion, or 85 cents, a year earlier, Rio de Janeiro-based Vale said today in a statement posted on the Brazilian security regulator’s Web site. The results topped the average estimate of 91 cents a share from eight analysts surveyed by Bloomberg News.

Sales surged 22 percent after Vale won annual price increases of at least 65 percent in supply contracts for iron ore, which accounted for more than half of sales in the quarter. Still, profit was eroded as the average price of nickel, the company’s second-biggest source of revenue, fell 43 percent from a year earlier.

“The market is in a buying mood after this result,” said Daniel Gorayeb, an analyst at Spinelli SA in Sao Paulo. “The company managed to take advantage of market demands by producing more of its higher-value products and focused more on what was of interest, which conveys a positive image.”

Analysts’ Estimates

Vale, led by Chief Executive Officer Roger Agnelli, is spending $59 billion in the five years through 2012 to increase iron-ore capacity by 40 percent to 450 million metric tons a year and double nickel and copper production. Vale raised $12.1 billion in a July share sale, the biggest ever by a Brazilian company, to fund expansion and acquisitions.

The value of Vale’s iron-ore sales climbed 72 percent to $6.12 billion in the quarter, while nickel plunged 41 percent to $1.87 billion.

Vale this year negotiated a sixth annual increase in contract prices for its iron ore, the main raw material used to make steel. Nickel for delivery in three months averaged $25,919.69 a metric ton on the London Metal Exchange during the quarter, down 43 percent from a year earlier.

Vale said profitability at its nickel operations are high because the company is a low-cost producer.

“In the medium term, the combination of a reduced level of stainless-steel stockpiles and a drop in nickel inventories creates a favorable environment for the strong recovery of prices of the metal,” Vale said in the statement.

Copper, Coal

Agnelli is seeking to expand in coal and copper as quarterly profit growth slowed from a 69 percent average in the past four years. In May, Agnelli told business leaders in Rio de Janeiro that “if Vale doesn’t grow, it will be swallowed.”

Net revenue rose to $10.6 billion from $8.69 billion in the second quarter of 2007. Vale was expected to post sales of $11.8 billion, the average of four estimates compiled by Bloomberg.

The results are based on generally accepted accounting principles in the U.S.

Based on Brazilian accounting standards, profit fell 22 percent as a weaker dollar eroded the value of exports when converted back into the local currency. Net income fell to 4.57 billion reais ($2.9 billion), or 94 centavos a share, from 5.84 billion reais, or 1.21 reais a share, a year earlier, Vale said in a statement on its Web site. Sales climbed 3 percent to 18.3 billion reais.

Most of Vale’s sales are priced in dollars. The U.S. currency fell 17 percent against the Brazilian real in the 12 months through the end of the second quarter.

Vale’s American depositary receipts gained 2.3 percent to $27.30 at 7:21 p.m. in after-hours trading in New York.

In regular Sao Paulo trading, Vale rose 1.9 percent to 36.71 reais. The stock has declined 28 percent this year, compared with a 9.9 percent drop for Brazil’s Bovespa stock index.

Metalloinvest sees 2008 revenue at $11 bln -source

August 4th (Reuters) – Metalloinvest, the Russian miner founded by billionaire Alisher Usmanov, forecasts core earnings will double this year to $5.2 billion and revenues will rise 80 percent to over $11 billion, a company source said on Monday.

Metalloinvest, which is planning an initial public offering of its shares this year, plans to invest 266.8 billion roubles ($11.4 billion) between 2009 and 2012, in addition to investment of at least 28 billion roubles ($1.2 billion) planned for 2008.

 

“The market dynamics will allow us to reach these numbers this year,” the source, who declined to be identified, told reporters, referring to the forecast revenue and earnings before interest, taxation, depreciation and amortisation (EBITDA).

 

Metalloinvest, co-owned by Usmanov and billionaires Vasily Anisimov and Andrei Skoch, produces 40 percent of Russia’s iron ore. It operates the country’s two largest iron mines and holds the world’s largest reserves of the steelmaking raw material.

 

Global iron ore prices have quadrupled in the past five years as China, producer of a third of the world’s steel, devours more of the raw material. Benchmark prices set by leading miners and Chinese buyers rose as much as 96.5 percent this year, the highest jump in a decade.

 

Metalloinvest posted 2007 revenues of $6.1 billion and EBITDA of $2.5 billion, the source said, confirming figures issued by the company earlier this year.

 

Metalloinvest plans to float up to 25 percent of its shares in an autumn IPO, sources close to the deal have said previously. The company has also been linked with London-listed Kazakh copper miner Kazakhmys (KAZ.L: Quote, Profile, Research, Stock Buzz).

Usmanov also agreed in May with Vladimir Potanin, the largest shareholder in Norilsk Nickel (GMKN.MM: Quote, Profile, Research, Stock Buzz), to swap assets in a deal that could create a large, diversified Russian mining house.

 

The terms of that deal envisage Usmanov buying up to 10 percent in Norilsk and Potanin purchasing 25 percent plus one share in Metalloinvest. [ID:nL28692466]

 

 

 

HIGHER OUTPUT

 

Metalloinvest plans to increase iron ore concentrate output by 50 percent to 60 million tonnes by 2013.

 

This year, the company plans to increase production of iron ore to 102 million tonnes from 100.16 million tonnes in 2007. Iron ore concentrate output is forecast to rise to 42.8 million tonnes from 41.3 million tonnes, the source said.

 

Output of hot-briquetted iron is forecast to double to 2.46 million tonnes from 1.21 million tonnes after the launch of a second plant at the company’s biggest iron mine, Lebedinsky.

 

Production at Metalloinvest’s two steel mills ranks it Russia’s fifth-largest steel producer.

 

Crude steel output is forecast to rise to 6.91 million tonnes in 2008 from 6.44 million tonnes last year and rolled product output to 5.18 million tonnes from 4.85 million tonnes.

Iron ore price hike leads to increased profit at Portman

July 31st (The Australian Business) – PORTMAN’S first half net profit has more than doubled to $137.1 million from $57.1 million last year, with iron ore prices behind the rise.

Portman (ASX: PMM) said profits were boosted by the increase in the benchmark price of iron ore with increases of 80 per cent for fines and 97 per cent for lump agreed earlier this year.

The iron ore miner, which is 85 per cent owned by Cleveland-Cliffs, said it expects to produce 8 million tonnes of iron ore in 2008, with 7.7 million tonnes coming from its Koolyanobbing operation and 300,000 tonnes from Cockatoo Island.

Portman said the pre-feasibility study of a potential expansion of Koolyanobbing beyond 8.5 million tonnes a year is planned to be completed during the second quarter of 2009.

FMG reports shipping $310m worth of ore

July 30th (The West Australian) – Fortescue Metals Group has shipped $310 million worth of iron ore to China in the past 11 weeks, after making the move from iron ore aspirant to producer, the company has announced.

The start of production had helped bring FMG’s cash on hand to $192.2 million by the end of the June quarter, the firm said in its quarterly announcement.

The company had loaded 4 million tonnes of ore from its mine in WA’s Pilbara region from the start of production to July 29.

FMG had set its benchmark price at $US2.0169 per iron unit of lump and $US1.4466 per iron unit of fine ore – a respective increase of 95 per cent and 78 per cent over the previous year.

The firm had increased its tenement area by over 17,000sqkm during the quarter, taking its total area to about 57,400sqkm – of which 44,400sqkm is in WA.

At 10.30am, FMG shares were trading at $8.24, up 29¢ or 3.6 per cent.

Sesa Goa announces Q1 2008 results

July 24th (Steel Guru) – Indian iron ore major Sesa Goa Limited has announced the following unaudited results for the quarter ended June 30th 2008.

Sesa Goa Limited has posted a profit after tax of INR 6447.20 million for the quarter ended June 30th 2008 as compared to INR 1188.60 million for the quarter ended June 30th 2007. Total Income has increased from INR 4643.10 million for the quarter ended June 30th 2007 to INR 13109.30 million for the quarter ended June 30th 2008.

Sesa Goa Limited has posted a net profit of INR 6330.70 million for the quarter ended June 30th 2008 as compared to INR 1313.30 million for the quarter ended June 30th 2007. Total Income has increased from INR 5283.10 million for the quarter ended June 30th 2007 to INR 13411.60 million for the quarter ended June 30th 008.

Indian Mining Ind. To Touch $30 Bln. By 2012

June 4th (RTTNews) – Indian Mining industry would touch the $30 billion mark in 4 years and would account for 2.5% of GDP, said a report by financial services firm Edelweiss.

The country ranks among the global top 10 for deposits in iron ore, coal, bauxite contributing 3%, 10% and 4% respectively of the world’s resources.

The report said that with strong potential for further development and scaling up the country could achieve the target if it develops a conducive regulatory framework and attracts significant investment in exploration, mine development and infrastructure.

Mechel’s fiscal year iron ore output unchanged

May 30 (Iron Ore Daily Post) – Russian Mechel’s iron ore production remained unchanged in the 2007 fiscal year, compared to FY 2006, according to quarterly results posted by the company yesterday. It reached an output of 4.96m tonnes of iron ore concentrates, pratically the same level than the previous fiscal year. On the other hand, Mechel’s mining arm lifted the output in other segments, such as coking coal and nickel, respectivelly by 7% and 19%.

NMDC profit in 2007-08 surges by 40% YoY

May 22 (Steel Guru) – It is reported that aided by a hike in prices, the public sector mining major NMDC Ltd has registered a 43% YoY increase in net profit to INR 1,016 crore for the fourth quarter ended March 31st 2008 as compared to INR 711.01 crore in the corresponding previous quarter.

NMDC in a release said that it has registered a net profit of INR 3,250.98 crore for 2007-08, a 40% YoY growth over the corresponding period a year ago. Net sales for the quarter under review increased 38% YoY to INR 1,894.51 crore.

The release said that “NMDC achieved a record domestic sale of 24.406 million tonnes of iron ore as against the previous year’s sale of 22.328 million tonnes, a 9% YoY increase. Total export of iron ore during the year was 3.778 million tonnes as against 3.261 million tonnes in the previous year, an increase of 16% YoY including low grade ore.”

It added that “The company has declared a final dividend of INR 214.09 crore in addition to the interim dividends of INR 437.44 crore already paid, totaling to INR 651.53 crore for 2007-08. The final dividend recommended by the Board works out to 54% on post bonus shareholding basis.”

An official spokesperson told Business Line “NMDC ascribed two main reasons for the performance. The first was the increase in production despite the logistical problems in the movement of ore by railways and second due to the hike in prices.”

NMDC had hiked prices across all grades of iron ore by 47.5% to INR 1,783 per tonne from October 2007. Before the price hike, it used to sell the ore with 64% iron content at INR 1,209 per tonne.