Bloomberg reported that Vale SA plans to invest the least in 3 years in 2013 as lower prices and slowing demand erode profit. Shares fell for the first time in three days.
The Rio de Janeiro based company in a regulatory filing said that Vale will invest USD 16.3 billion next year, down from a revised USD 17.5 billion this year. That compares with a USD 15.3 billion average estimate of 9 analysts compiled.
Vale in the statement said that "The prospects for a moderate expansion of global demand for minerals and metals in the medium term require rigid discipline in capital allocation and a stronger focus on maximizing efficiency."
Mr Murilo Ferreira CEO of Vale SA is selling assets, looking for partners and writing off unprofitable projects after shares slumped to the lowest in almost 3 years in September. The investment reduction is the biggest since 2009, when Vale announced a 36% mid year reduction in capital expenditure to about USD 9 billion.
Vale said that iron ore output will drop to 306 million metric tonnes in 2013 from 312 million tonnes this year, while nickel production is expected to decline 13% to 260,000 tonnes. Copper production is forecast to grow 19% to 365,000 tons next year, while coal output will decline to 12.4 million metric tonne.
It said that is cutting capital expenditures next year by 6.9%, it won't reach the USD 21.4 billion initially budgeted for 2012, the second consecutive year the company misses its annual investment target. The company will spend about 47% of the 2013 budget on the ferrous business, its most profitable unit.
Mr Ferreira during a presentation to investors at the New York Stock Exchange said that "We are at the end of the supercycle, we are living a new moment in the mining industry. The new scenario requires stricter discipline in capital allocation."
He said that Vale may sell as much as 70% of its VLI logistics unit after receiving huge interest from potential partners in its general cargo business as it seeks to divest lower return assets. The company, which is also looking for partners at its Nacala railway and port project in Mozambique, will send a proposal to sell its oil and gas assets to the company's board.
