Vale profit rises on back of cost-cutting

Vale, the world's largest iron ore miner, reported profit that beat analysts' estimates for the first time in two years as cost reductions and higher copper sales offset lower prices for the steel ingredient.

First-quarter net income of US$3.11 billion, or 60 US cents a share, compared with a loss of US$2.7 billion, or 52 US cents, in the previous three-month period, according to a statement after the close of trading on Wednesday.

Vale was expected to post per-share profit excluding items of 55.8 US cents, the average of 13 analysts' estimates. Net income fell from US$3.79 billion, or US 74 cents, in the same period last year.

Vale, the worst-performing major mining stock this year, is seeking to bolster investor confidence by putting lower-return projects on hold, selling assets and cutting costs. The company's profit, boosted by the partial booking of a gold deal with Silver Wheaton in February, is the first quarter-on-quarter increase since the first three months of 2011.

"They did a very effective job cutting costs during the quarter," said Garrett Nelson, an equity analyst at BB&T Capital Markets. "Vale has started these efforts several months ago and now we are starting to see that in their financial results."

Net sales fell 5.3 per cent to US$10.9 billion in the period after Vale sold its iron ore at an average US$111.69 per tonne, 5.4 per cent less than a year earlier. That was below the US$121 per tonne average of three estimates. Vale shipped 65.1 million tonnes of iron ore and pellets, a processed form of the mineral, during the quarter, little changed from the previous year.