Vale to Postpone $3 Billion Potash Project in Canada

Vale SA (VALE5) will postpone a $3 billion fertilizer project in Canada and may delay other investments as it seeks to contain spending and focuses on the expansion of its biggest mine, Chief Executive Officer Murilo Ferreira said.

The world’s largest iron-ore producer is committed to “cost austerity,” Ferreira told reporters during an event in Rio de Janeiro today. Vale’s priority is the expansion of its $8.04 billion Serra Sul investment in Carajas, the world’s largest iron-ore mine, which is the company’s biggest project ever, Ferreira said.

Ferreira, who took the helm at the Brazilian miner from Roger Agnelli a year ago, is considering selling unprofitable assets and reviewing spending plans amid rising costs and labor shortages. The company this year sold a thermal-coal project in Colombia for $407 million, its ferromanganese alloy businesses in Europe for $160 million and also exited the kaolin mineral business.

Vale, based in Rio, will postpone the development of its $3 billion Kronau potash project in the Canadian province of Saskatchewan, the world’s largest potash producing region, which the company is reassessing, Ferreira said.

“Certainly it won’t be implemented now,” Ferreira said. “We have other” projects that may be postponed too, he said, declining to name them “because it needs to be announced to shareholders first.”

Price Recovery

Vale expects iron-ore prices to start rebounding as soon as next month because of declining stockpiles in China and the country’s rising demand for construction, Ferreira said. Iron- ore prices dropped to the lowest since December 2009 today on slower growth in China, the biggest user of the steelmaking ingredient, and a weaker outlook for the global economy.

“We will have a good improvement in price starting in September or October,” he said.

The price of ore with 62 percent iron content for immediate delivery to the Chinese port of Tianjin dropped 1.1 percent to $111.90 a ton today, the lowest since Dec. 24, according to a price index compiled by The Steel Index Ltd. The price, which rose to as much as $191.90 per ton last year, slid 19 percent during 2012.

Chinese manufacturing growth is “anemic” and private companies in China are reluctant to invest, while the country’s construction industry shows “much better” signs of recovery, Ferreira said.

Vale rose 1.2 percent to close at 35.92 reais in Sao Paulo. The stock declined 9.6 percent in the past 12 months.

To contact the reporter on this story: Juan Pablo Spinetto in Rio de Janeiro at jspinetto@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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