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Vale CEO: Confident On 20-Year Market Growth To Sustain Capex

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RIO DE JANEIRO, Aug. 2&nbsp; -- Brazilian miner Vale SA (Vale, VALE5.BR) is confident market growth over the next 20 years will support planned investments to boost output capacity in iron ore, copper, coal and fertilizers, Chief Executive Officer Roger Agnelli said Friday.
&quot;We're at the best moment in our history, we're developing our assets and we've overcome all the difficulties,&quot; Agnelli told analysts on a call. &quot;The trend is really positive. We're committed to growth and can adjust our capex.&quot;
Vale, the world's biggest iron ore producer, reported Thursday its net income surged more than fourfold in the second quarter on a doubling in iron ore prices as steelmakers worldwide emerged from the financial crisis. Profit rose to $3.71 billion from $790 million a year earlier, laying firm foundations for a new period of capacity growth.
Vale has invested about $16 billion in new projects that will shortly start to provide returns, allowing greenfield projects involving copper, coal and fertilizers and now coming on stream to proceed immediately to expansion, Agnelli said.
Bayovar phosphates mine in Peru, which started up this year, and Brazil's Salobo copper project and Moatize coal project in Mozambique, due to start producing in 2011, will move straight to second-phase expansion. This should bring scale economies allowing Vale to enter the first quartile in the international costs ranking for these projects, from its current position in the second quartile, he said on the call.
&quot;We're bullish on copper, we'd like to double or triple our copper concentrates production here or elsewhere,&quot; the CEO said. Vale's $1.13 billion offer, announced Thursday, to buy Paranapanema SA (PMAM3.BR), which operates Brazil's sole copper smelter, is in line with a strategy to make even small acquisitions if these will bring cost savings, Agnelli said.
A decision to expand Companhia Siderurgica do Atlantico, a 5 million metric-tons-a-year steel mill that is a joint venture with German steelmaker ThyssenKrupp Steel, may be made by year-end, he said. Vale has a 26.87% stake in CSA in Rio de Janeiro state.
&quot;We'd like to increase our exposure to the Brazilian market,&quot; Agnelli said.
Both short-term and long-term global market prospects are now positive, Vale executives said on the call.
&quot;Financial markets were predicting risks that didn't happen,&quot; said Vale's chief financial officer, Guilherme Cavalcanti. Economic recovery and confidence remain strong in core European markets and China's growth has slowed to a more sustainable pace, meaning iron-ore demand remains strong, even in the short term, he said.
Iron ore prices will stay above $100 a ton in the long term, as global crude steel output has recovered to its precrisis levels, said Jose Carlos Martins, company executive director for marketing, sales and strategy.
Demand for the steel-making ingredient recovered most rapidly in the second quarter among European steelmakers, who will recover further into the fourth quarter, when a new market rebound should occur, Martins said.
Ore demand from China, the biggest customer, will also increase as local miners are already producing at nearly full capacity with little scope for further growth, Martins said. Chinese miners have an average iron ore production cost of $80-$90 a ton, as many mines are underground rather than open pit and have low iron grades, he said.
&quot;Volatility in markets will reduce,&quot; Martins told analysts on the call. &quot;Customers are committing to the new quarterly ore pricing system, which we're confident is here to stay.&quot;
In nickel, inventories are falling and markets are pricing in the end of the yearlong strike at Vale's Sudbury mine in Canada, Cavalcanti said.
Vale's base metals executive director, Tito Martins, said the company will resume full capacity working at Sudbury by late September.
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Vale CEO: Confident On 20-Year Market Growth To Sustain Capex | Shanghai Non ferrous Metals

Vale CEO: Confident On 20-Year Market Growth To Sustain Capex

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