Major Brazilian mining company Vale SA (NYSE: VALE), the world’s biggest producer and exporter of iron ore, has enacted a 24 percent cut in estimated 2013 capital expenses.
Demand for metals dropped and iron ore prices were depressed recently because of anemic growth across China, the U.S., and the Eurozone. Iron ore is presently priced around $115/ton, and Vale expects it to range between $110-$140/ton in 2013.
Due to the worldwide economic slowdown and reduced iron ore prices, the company revised its expansion plans.
In 2013, Vale expects to invest $16.3 billion rather than $24.1 billion into new projects and development.
"The outlook for slower expansion of global demand for minerals and metals in the medium term requires rigid discipline in the allocation of capital and greater focus in maximizing efficiency and reducing costs," the company said in the statement.
Vale will be deactivating the Simandou ore mine in Guinea and the Brazilian Samarco IV pellet plant it runs with BHP Billiton Plc (NYSE: BBL) in a 50/50 split.
Vale is also halting the Lubambe copper mine in Zambia and is considering the sale of its 22 percent share in Norsk Hydro, the Norwegian aluminum group.
Vale may increase the sale of VLI SA, its new logistics unit, to between 50 and 70 percent. The company happens to be Brazil’s biggest rail and port operator, and VLI operates in non-mining general cargo.
Vale’s spending for 2012 is expected to remain below $17.5 billion, or 18 percent lower than original expectations. The mining company will spend 47 percent of 2013’s capital expenses directly on iron ore. It already accounts for more than one-fourth of the world’s oceanic iron ore exports.
Iron ore sales expectations for 2013 are lower by 1.9 percent to 306 million tons. The company also expects nick sales of around 260,000 tons in 2013—lower by 13 percent from 2012 estimates.
In general, the company will look to reduce expansion into new mines and projects and more toward increasing baseline efficiencies.
Vale's ADR shares were down 0.52 percent on Tuesday afternoon to $17.34.