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Gold/Mining/Energy : Mining News of Note -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (37502)	5/22/2009 5:38:10 PM
From: LoneClone	Read Replies (1) \| Respond to of 194204

Markets shrug off Vale 2009 investment cuts Fri May 22, 2009 1:43pm EDT reuters.com * Vale cuts 2009 investments in face of slumping demand * Slows investments in some key iron ore projects * Maintains long-term goals to hike production By Denise Luna and Brian Ellsworth RIO DE JANEIRO, May 22 (Reuters) - Brazilian miner Vale's decision to slash 2009 investments comes as no surprise to markets, analysts said on Friday, as a slowing global economy has cut demand for iron ore. Vale (VALE5.SA)(VALE.N), the world's biggest producer, said on Thursday it was cutting this year's investments by 37 percent to $9 billion, citing costs related to foreign exchange movements and delays in obtaining permits. The investment cut comes after Vale has already slimmed down its operations, shedding workers and idling capacity as it hunkers down for a prolonged downturn in the global steel industry, the principal consumer of iron ore. "The company is reacting to the reality we're living in; I think it's the right move and it's not a big surprise," said Carlos de Alba of Morgan Stanley in New York. "They don't need to accelerate the production of iron ore as rapidly as thought in the past given what is taking place with the steel industry." Vale's shares had risen 0.4 percent in midday trading on Sao Paulo's Bovespa stock exchange as traders shrugged off the announcement. The company said its first-quarter net profits fell by a third as the global economic crisis hit demand. It cut iron ore output 10 percent and idled a third of its pellet capacity as industrial output began to slide around the world. The strengthening of the Brazil's currency, the real BRBY, also means Vale gets less in local money when it exchanges the dollars it receives from importers, providing another motive to trim spending. It now trades at 2.03 per dollar compared with a 2008 high of 1.56 per dollar in August. Vale's new 2009 plan includes $5.9 billion for project investment and $1 billion for research and development. The move reduces this year's outlays for existing projects but does not cancel any of them or reduce the total amount to be invested in each, and the company maintains plans to ramp up iron ore production in the coming years. "The truth is that this strategy was expected. (Vale) had already been showing signs it was taking the economic situation into account," said Juliana Chu of BES Securities. "It's reasonable to think that the company would extend (the period for) its investment program." The cuts also show a continuing trend of diversification of Vale's production toward nonferrous metals such as nickel and copper, with investment in iron ore being stretched out over longer periods. Total investment in iron projects would fall to $2.3 billion, representing a quarter of total planned spending. Vale's largest iron ore project, Carajas, in the Amazon jungle, would see 40 percent less investment this year than first planned. Nonferrous metals investments would fall to $3.1 billion from $4.8 billion, but would actually represent a greater percentage of this year's investment budget than was originally planned, while the proportion allocated to iron ore fell. Iron ore represented 57 percent of Vale's sales in 2008. "In mining and in nickel Vale is big, but it is not as influential in coal and copper," said Pedro Galdi, an analyst with broker SLW in Sao Paulo. "It's seeking to boost its position in those segments, which are also linked to the steel industry." ($1 = 2.02 reais) (Editing by Gerald E. McCormick)