Reuters reported that Brazil's Vale, the world's second largest mining company, cut estimated 2013 capital spending by 24% after a global slowdown and a drop in iron ore prices led the company to rethink its outlook for expansion.
Vale will invest USD 16.3 billion in 2013, down from the USD 21.4 billion budgeted this year for new projects, research and development and to maintain existing mines and plants, according to a regulatory filing on December 3rd.
The 2013 investment plan is the smallest for the Rio de Janeiro based company since 2010 and removes the Lubambe copper project in Zambia from its board approved investment program. The plan also confirms the removal of its Simandou iron ore mine in Guinea and the Samarco IV pellet plant with Australia's BHP Billiton in Brazil.
The retrenchment comes after sluggish growth in the US, China and Europe. Demand for metals has been hurt and the price of iron ore, Vale's main product, fell to a 3 year low in September.
The company said that its cuts began earlier this year. Final 2012 spending is not expected to surpass USD 17.5 billion, 18% less than Vale's original plan announced a year ago. Vale spent a record USD 18 billion in 2011, a quarter less than the USD 24 billion originally budgeted for the year.
The company in the statement said that "The outlook for slower expansion of global demand for minerals and metals in the medium term requires rigid discipline in the allocation of capital and greater focus in maximizing efficiency and reducing costs."
Iron ore is Vale's main product and the company is the world's largest producer of the mineral, the main ingredient in steel. While the company is also a major producer of nickel, copper and fertilizers, it gets about 90% of its profit from iron ore.
However, the company's outlook for 2013 iron ore sales is down 1.9% to 306 million tonnes from the original 2012 estimate of 312 million tonnes.
Meanwhile, Vale plans to maintain its focus on iron ore, dedicating 47% of 2013 capital spending to the mineral. That is about the same percentage as budgeted in 2012 despite a 22% cut in overall iron ore spending.
Spending on coal projects next year is expected to rise to 10.6% of the total from 6.9% this year.
