TORONTO (miningweekly.com) – Brazil’s Vale, the world’s biggest iron-ore producer, has reported an $8.6-billion fourth-quarter net loss – its worst ever as a private company – as lower prices for the steelmaking ingredient prompted asset write-downs, mostly on its coal and nickel assets totalling $9.37-billion.

Excluding special items, Vale’s underlying loss totalled $1.03-billion, compared with a loss of $251-million year-on-year.

Vale reported earnings before interest, tax, depreciation and amortisation of $1.39-billion, down 36% from a year earlier.

Vale’s 2015 realised cost-and-freight price for iron-ore fines (excluding run-of-mine ore) was $44.6 per wet metric ton, 41% lower over 2014, as a global supply glut and reduced demand from China drove prices lower. In the fourth quarter, iron-ore price fell as low as $37/t.

In dealing with the commodity downturn, the world’s big three iron-ore producers – Vale, Rio Tinto and BHP Billiton – had been pursuing a strategy of ramping up output to leverage economies of scale that drove costs down, in an attempt to consolidate market share, as smaller and more expensive production was forced out of the market.

Iron-ore sales rose 12% quarter-on-quarter to 79.21-million tons and, for the full year, sales rose 8% to 276.4-million tons. Vale reported production costs of $11.9/t, excluding royalties.

A 47% depreciation of the Brazilian real against the US dollar in 2015 increased the cost of servicing US dollar-denominated debt, which totalled $25.23-billion as at the the end of December.

DEBT REDUCTION
During a conference call on Thursday morning, CEO Murilo Ferreira stated that Vale would consider selling any of its assets to reduce its net debt load to at least $15-billion.

Vale had been selling noncore assets, such as its fertiliser operations and its giant iron-ore ships, to make up cash shortfalls as it spent $8.4-billion in 2015 to forge ahead with construction of its massive $14.5-billion SD11 iron-ore project, in Brazil’s Amazon, and the Moatize II and Nakala Logistics Corridor, in Mozambique, which were reported to be 99% and 97% physically complete.

Vale pinned its future hopes on the SD11 project, the largest in its history, to become the lowest-cost iron-ore producer in the world. The project was expected to produce up to 90-million tons of iron-ore a year at full capacity, with operations expected to start at the end of the year.

Vale expected 2016 to be a challenging year for iron-ore producers as no significant stimulus was expected from the Chinese government to boost investments. Steel demand and production would remain mild, posing additional challenges for higher-cost iron-ore producers, the company stated.