Rio de Janeiro, Brazil-base Vale S.A. announced Friday that iron ore production reached the highest level for a fourth quarter, at 85.5 million metric tons, allowing for a larger exposure to the price rally of the final months of last year.
Due to seasonality, iron ore output in the last quarter of each year is normally lower than in the third quarter. This was the first time since 2003 that the performance in a fourth quarter was better than in Q3, being 1.9 percent higher.
Two factors were instrumental to this achievement: first, after the conclusion of the prestipping the operation of the N5 South mine in Carajás contributed not only to the output increase, but to better quality and lower costs; and second, below normal rainfall during the quarter helped operations.
Coal production also reached a quarterly all-time high mostly due to the successful ramp-up of Carborough Downs, after the issues which determined its shutdown in 2Q12. According to Vale, 2012 was a challenging year in view of the adverse weather conditions which affected iron ore production in Brazil in the first quarter, and the stoppages of Sudbury, Carborough Downs, VNC and On a Puma caused by safety and operational problems. With the exception of On a Puma, all of them returned to operation. Vale's iron ore production was 320.0 million metric tons in 2012, slightly lower than 2011. Nickel output, at 237,000 metric tons, fell 1.9 percent in relation to the previous year.
On the other hand, three annual production records were achieved: pellets (55.1 million metric tons), coal (7.1 million metric tons) and phosphate rock (8.0 million metric tons). Additionally, Moatize delivered 3.768 million metric tons of coal in its first year of operation. In the second half of 2013, two iron ore projects will come on stream: Carajás (an additional 40 million metric tons per year) and Conceio Itabiritos, which will contribute to the enhancement of Vale's iron ore operations, through production increase, higher average Fe grade and lower costs. These effects on the company's performance will be material from 2014 onwards.
The prospects of a moderate expansion of the global demand for minerals and metals over the medium-term do require a stricter discipline in capital allocation and a stronger focus on maximizing efficiency and minimizing costs. Vales' growth plans reflect the priority shifting from the marginal volume to the capital efficient volume, a move that is expected to have significant positive implications for operating and financial performance. In this scenario, innovation, such as CORe, implemented in Q4 in our Sudbury operations, and truckless mining, to be employed in the Carajás S11D project, became an important driver of competitiveness in the mining industry.
