Vale Gain Spells Iron Pain With Giant Mine Ahead of Schedule – by Danielle Bochove and Juan Pablo Spinetto (Bloomberg News – October 1, 2015)

http://www.bloomberg.com/

The world’s top iron-ore producer has some bad news for the oversupplied market: its biggest project is running ahead of schedule.

S11D, part of the Carajas mining complex in northern Brazil, is on track to beat a targeted December 2016 start date, Vale SA Chief Financial Officer Luciano Siani said in an interview Wednesday.

The project — the industry’s largest and, according to Vale, the most profitable — will add 90 million metric tons of annual capacity to global supply, although Vale intends to control the speed at which it hits the market, Siani, 45, said in Toronto, where he is holding meetings with investors and analysts.

“We will manage the ramp up in order to preserve the premium for this high grade ore,” he said.
While S11D coming on stream sooner than planned would be a boon for Vale’s debt-reduction ambitions, it looms as another strain on an iron-ore market buffeted by a series of expansions by Vale and its main rivals in Australia at a time of slowing Chinese growth.

Price Rout

The big three, including BHP Billiton Ltd. and Rio Tinto Group, are seeking to navigate the aftermath of an iron-ore price collapse that was exacerbated by their own moves to push through projects and displace a string of new competitors.

Rio de Janeiro-based Vale — which has been cutting costs and selling assets under Chief Executive Officer Murilo Ferreira– on Monday said it planned to reduce this year’s dividend to the lowest since 2006 amid slumping metal prices and the need to preserve cash.

Iron-ore prices are down 21 percent this year, heading for a third straight annual decline. A price index compiled by Metal Bulletin fell 0.5 percent to $56.04 a ton on Thursday. Vale shares have lost 31 percent this year, in line with a peer-group average.

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