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.

August 4th (Reuters) – Brazilian iron ore miner Vale (VALE5.SA: Quote, Profile, Research)(RIO.N: Quote, Profile, Research) has ordered a dozen of the largest class of ore carriers from a Chinese shipbuilder for $1.6 billion, aiming to boost business with fast-growing Asian customers.

Vale, the world’s largest iron ore miner, expects the huge vessels to reduce shipping costs and make its ore more competitive with nearer Australian and Indian ore for the fast-growing Chinese steel industry, already the world’s largest.

 

“Looking at the expansion projects we have and (what) other players are doing, we don’t see the level (of ore demand) will be down for the next 2-3 years,” Eduardo Bartolomeo, Vale’s executive director for logistics, told reporters.

 

Vale said it ordered 12 very large ore carriers from Jiangsu Rongsheng Heavy Industries Co Ltd, each with a capacity of 400,000 deadweight tonnes. Delivery of the first is expected in early 2011 and the order is due to be completed by 2012.

 

The carrier programme adds to Vale’s previously announced global investment programme of $59 billion for 2008-12, as it aims to boost iron ore output by 50 percent to 450 million tonnes by 2013.

 

Vale has said it planned to ship more than 100 million tonnes of iron ore to China in 2008 under term contracts, a rise of 10 percent from 2007.

 

China’s crude steel output this year is forecast to rise about 10 percent to 550 million tonnes.

“So what we are doing is to find that option that gets iron ore closer. What we are doing is to stimulate steelmakers to build larger ships,” Bartolomeo told a media briefing, adding that Vale would outsource the operation of the fleet.

 

Asian steel mills’ negotiations with ore miners on annual term iron ore prices in 2008 stalled over the proposed inclusion of a freight premium sought by the Australian miners to reflect the higher shipping costs to China for Brazilian ore.

 

Bartolomeo said the large vessels would help Vale, which shed its sea transport operations in 2001, to address logistics shortcomings and better compete with global rivals such as BHP Billiton (BHP.AX: Quote, Profile, Research)(BLT.L: Quote, Profile, Research) and Rio Tinto (RIO.AX: Quote, Profile, Research)(RIO.L: Quote, Profile, Research).

 

The Australian companies received higher price increases than Vale in annual iron ore supply contracts with Asian steel mills for 2008.

 

“We’re trying to correct it — not the premium, but the freight rates,” Bartolomeo said. “I’m not happy with the freight levels. I don’t think they represent the actual cost of transportation.”

 

The Baltic Exchange chief sea freight index .BADI for global raw materials trade soared to a record 11,793 points in May, although it has since eased to 8,280 on Friday.

 

Vale, formerly Companhia Vale do Rio Doce (CVRD), said the new vessels would be part of a Brazil-Asia shuttle service with 18 very large ore carriers able to haul a combined total of 7.1 million deadweight tonnes.

 

The fleet will be able to carry an estimated 30.2 million tonnes of iron ore per year from Brazil to Asia, equivalent to 31 percent of the company’s shipments to China in 2007, Vale said.

July 31st (Steel Guru) – BNamericas reported that Brazilian miner Vale is in the process of selecting a construction firm for its Carajas iron ore processing plant expansion project, located in the state of Para in northern Brazil.

The USD 2.48 billion project, “Carajas 130,” will add 30 million tonnes per year to the current capacity of 100 million tonnes per year. Minerconsult Engenharia Limitada, a part of the Canadian engineering group SNC Lavalin, is providing engineering services.

July 21st (Steel Guru) – BNamerica reported that Brazilian miner Ferrous Resources do Brasil has unveiled a USD 6 billion, 2008 to 2014 business plan which includes acquisition of mining areas, implementation of projects, environmental remediation, research, purchase of equipment and construction of infrastructure.
Ferrous Resources do Brasil said it aims to reach iron ore output of 50 million tonnes per year by 2014 from the mines it already owns in Brazil.

Ferrous spokesperson said the goal is to reach 100 million tonnes per year by 2020, depending on the success of acquisitions and studies. The company expects to export most of its production. Created in 2007, Ferrous Resources is concentrating most of its works in southeast Brazil’s Minas Gerais state.

As per report, the idea is to start up at 1 million tonnes per year by December.

The report said to finance the investments, Ferrous owned by US, Australian and English investment banks plans to launch an IPO on the London Stock Exchange this year.

Ferrous Resources is presided by Mr Gilberto Mansur a geologist with over 35 years experience who has worked for Vale, Rio Tinto, Brazil’s geological survey CPRM, BP Minerals and Billiton Shell Metals.

July 7th (Trading Markets) – Sahaviriya Group, a Thai steel maker, said it expects to sign iron ore purchase agreements with three major producers in the third quarter of this year to secure raw material supply for its planned THB90 billion ($1.5 billion) smelter.

Rio Tinto Ltd. (RIO.AU) and BHP Billiton Ltd. (BHP.AU) and Brazil’s Vale do Rio Doce (RIO) will supply a total of eight million tons of iron ore a year to Sahaviriya Iron & Steel Co. for at least seven years, the company’s acting president Win Viriyaprapaikit said Monday.

Australian iron ore producers will provide around 70% of the total, with the balance from Vale. The iron ore price will be negotiated on a year-on-year basis, Win said.

Sahaviriya Iron & Steel plans to build Thailand’s first smelter, with an annual capacity of 5 million tons a year.

The plant, which will take two years to build, is expected to start construction in the fourth quarter of this year, said Win.

The company also expects to sign seven year loan agreements with Chinese banks in the third quarter of this year.

It recently signed a THB50 billion agreement with Sino-International Heavy Industry Technology for the Chinese company to supply machinery and provide installation services for its planned smelter.

Over 15 years, Sahaviriya Iron & Steel plans to spend about THB500 billion to increase annual smelter production to 33 million tons

Under the agreement, Sino-International Heavy Industry Technology will also supply machinery and provide services for the smelter’s expansion at a cost of about $10 billion.

July 6th (Steel Guru) – INQUIRER reported that Geograce Resources Philippines Inc has signed an exploration and option agreement with Vale Exploration Philippines Inc a subsidiary of Companhia Vale do Rio Doce, which it described as the second biggest mining company in the world, for exploration of seven mining claims containing copper and iron ore in Masbate province.

Vale has committed to fund exploration expenditures of up to USD 6 million for the first two phases of the exploration agreement. This will include geological sampling up to drilling and other exploration activities.

Geograce said in a disclosure to the stock exchange that it and Vale agreed to cooperate in exploring seven mining claims in Masbate covering 84,046 hectares.

It said its board approved the execution of an exclusive option agreement and irrevocable special power of attorney with seven companies that own the Masbate claims for the acquisition of these claims from them.

Under the agreement, Vale will conduct preliminary exploration and evaluation of the Masbate claims while Geograce will obtain approvals for the exploration permit applications and maintaining the Masbate claims with appropriate government agencies.

July 4th (The Sydney Morning Herald) – Vale plans to sell as much as $13.3 billion of new shares, the biggest offering in Brazilian history, to fund projects and acquisitions intended to create the world’s largest mining company.

The sale of up to 256.9 million common shares and 164.4 million preferred shares will take place as soon as today, Vale said yesterday.

The shares, excluding underwriters’ over-allotments, are worth 20.5 billion reais ($13.3 billion), based on Wednesday’s closing price in Sao Paulo.

“If Vale gets these resources, it must be for a possible acquisition,” said Daniel Gorayeb, a metals and mining analyst for Sao Paulo-based broker Spinelli. “The offer will certainly be oversubscribed.”

Rio de Janeiro-based Vale, which bought Canadian nickel producer Inco last year, said June 10 it would sell as much as $US15 billion ($15.6 billion) in stock to pay for expansion and possible takeovers.

Vale, which abandoned a $US90 billion bid for Xstrata Plc in March, said this week it may try to buy a copper smelter and a phosphate-fertilizer unit from Brazil’s Paranapanema.

Vale preferred shares fell 69 centavos, or 1.6%, to 42.71 reais yesterday in Sao Paulo. The company’s common shares fell 1.24 reais, or 2.4%, to 50.95 reais.

An acquisition would be in addition to the $US59 billion that Vale, led by chief executive Roger Agnelli, is already spending over five years as it tries to overtake BHP Billiton as the world’s top mining company.

With the investment, Vale aims to increase annual iron-ore output by 40% to 450 million metric tonnes by 2012, equal to more than a third of global seaborne trade of the commodity.

Vale also plans to double nickel and copper output to about 500,000 tonnes and 592,000 tonnes, respectively.

The share sale is the “next step in the process to strategic development or acquisition,” Cristiane Viana, a Rio de Janeiro-based analyst with broker Agora Corretora, said. She recommends buying Vale shares.

Vale’s share offering, equal to about 8.7% of its market capitalisation, would be the biggest ever by a Brazilian company.

The government and minority shareholders first sold a stake in Vale for 3.34 billion reais in 1997.

Vale will apply to list its ADRs on the Paris-based Euronext exchange. Shareholders who are residents of Brazil will have priority in the sale.