The Sudbury Star is the City of Greater Sudbury’s daily newspaper.
RIO DE JANEIRO — Vale SA, the world’s largest iron ore miner, said on Wednesday that first-quarter profit fell by nearly half from a year earlier because rains limited exports, prices for its main products fell and spending on new mining projects rose.
Net income in the three months ended March 31 fell 44% to $3.83 billion compared with $6.83 billion a year earlier, the Rio de Janeiro-based company said in a filing to Brazil’s securities regulator.
Results were in line with the average estimate of six analysts surveyed by Reuters. They expected net income to fall to $3.8 billion, 45% less than the year-earlier period and 19.4% less than in the fourth quarter.
“The first quarter is generally the weakest of the year from a financial and operational perspective,” the filing said. “This year, the strong rain volumes in Brazil deepened the seasonal effect on sales and costs, that along with lower prices for iron-ore and pellets cut our operating margins and profit.” Profit was 18% lower than in the fourth quarter of 2011.
The drop in profit comes as Chief Executive Murilo Ferreira boosts investment to keep up with strong demand for iron ore, nickel, copper and coal from China and other Asian markets. The high demand comes as output from existing mines falls.
Additionally, heavy rains and a railway bridge accident limited exports even as prices for iron ore, nickel and copper fell, said Marcelo Aguiar, metals and mining analyst with Goldman Sachs in Sao Paulo.
The new projects include expansion of Vale’s giant Carajas iron-ore mine in the Brazilian Amazon and expansion of the Moatize coal mine in Mozambique.
The company spent $3.7 billion on new projects in the first quarter, 37% more than a year earlier.
In November, Vale announced a $12.9 billion plan to expand mines and other projects in 2012, including $2.54 billion for Carajas, nearly double 2011 investments there.
The plan also foresaw investments of $1.19 billion for mine expansion and related rail and port facilities in Moatize, nearly double last year’s spending. Moatize is expected to be the largest coal project in the Southern Hemisphere.
Vale said Wednesday that it plans to begin operating at its Salobo copper mine in Brazil’s Amazon within weeks. The mine has a design capacity of 100,000 tonnes a year.
As spending rose, the price of the company’s main products fell. The average price of iron ore on the spot market, which is used to adjust prices on 85% of the company’s iron ore sales, fell by a fifth to an average of $143.46 a tonne in the quarter from a year earlier.
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