CORRECTED – UPDATE 2-Brazil’s Vale to invest record $24 bln in 2011

(Corrects bullet point to show 2010 investment budget was
$12.9 bln, not $14.3 bln, corrects comparative in paragraph 2)

* Record capex plan follows best quarterly results ever

* Company to invest $24 bln in 2011, $12.9 bln in 2010

* Plan aims to help Vale diversify from iron ore

By Brian Ellsworth and Guillermo Parra-Bernal

RIO DE JANEIRO/SAO PAULO, Oct 27 (BestGrowthStock) – Brazilian
mining company Vale, the world’s top iron ore producer, will
invest a record $24 billion in 2011 as it diversifies toward
pricier metals and profitable fertilizers.

Vale’s highly awaited capex budget nearly doubles this
year’s outlays and will lay the groundwork for the company to
vastly boost output of key products amid soaring demand for
minerals from emerging markets such as China.

“Our budget is consistent with our long-term view of demand
and market fundamentals for minerals, metals and fertilizers,”
Investor Relations’ Director Roberto Castello Branco said on an
earnings conference call.


Vale iron output graphic:

Graphic on iron ore:


The announcement of massive investments comes a day after
Vale said third-quarter earnings more than doubled to a
quarterly record of $6.1 billion, beating estimates in a
Reuters poll. [ID:nN27265874]

Output of iron ore — which is in heavy demand as
developing nations rapidly build out infrastructure — was
expected to jump almost 75 percent to 522 million tonnes per
year by 2015 from current capacity of around 300 million

The investment plan also shows major growth in output of
fertilizers, which have become an increasingly important part
of Vale’s business due to soaring demand sparked by rising food
consumption around the world.

The company, which has spent nearly $6 billion this year
alone on fertilizer acquisitions, expects to double phosphate
rock output and more than quadruple potash production between
2011 and 2015.

Before the end of this year, Vale expects to begin
production at the Onca Puma nickel mine in Brazil and the Tres
Valles copper project in Chile, operations that will also
diversify its production base.

Vale’s preferred shares, the company’s most widely traded
class of stock, dropped 1 percent in early afternoon trading to
48.26 reais in Sao Paulo.


The strong spending plan should help Vale’s relations with
Brazil’s government, which harshly criticized the company in
2009 for slashing its investment budget in the wake of the
financial crisis.

The government still holds considerable sway over Vale, a
former state-run company that was privatized in the 1990s.
State-linked pension funds and the government’s development
bank BNDES are still key shareholders.

Analysts believe that Vale’s strong cash position, which
has allowed it to give shareholders billions of dollars in
dividends, will spur politicians in the coming months to push
for higher mineral royalties to tap into rising prices.

Vale has benefited from the global economic growth since
the financial crisis that boosted commodities prices from 2009
levels, as well as a switch to a quarterly pricing system that
increased the sale price it receives for its iron ore.

The quarterly system replaced the aging benchmark
arrangement in which iron prices were negotiated each year
among steelmakers the world’s top three miners, Vale and
Anglo-Australians BHP Billiton (BHP.AX: ) and Rio Tinto
(RIO.AX: ).

Prices are now mostly set each quarter through indexes
based on spot prices of the previous three months.

Spot market iron prices (.IO62-CNI=SI: ) topped $180 per
tonne earlier this year but are now close to $150 per tonne,
compared with quarterly prices of around $135 per tonne.
(Editing by Maureen Bavdek, Dave Zimmerman)

CORRECTED – UPDATE 2-Brazil’s Vale to invest record $24 bln in 2011