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Iron Ore Drives Record Profits for Vale

A rise in demand for iron ore along with a new price regime brings the world's second-largest mining company Vale record profits and revenue in the third quarter for 2010.

The Brazilian mining giant is the world's largest producer of iron ore globally. As per the company, cash generation before interest, taxes, debt and amortisation rose to $8.8 billion.

Its previous record for cash generation was in the third quarter of 2008 at $6.4 billion. The new price system was adjusted quarterly and linked to the Chinese iron ore spot market. This pricing regime was implemented by BHP Billiton, Rio Tinto and Vale in preference to the traditional benchmark system of one year long contracts.

The new system delivered an increase in price for iron ore to the tune of 90 to 100% in the second quarter and the average price of iron ore rose by another 39% in the third quarter. The recovery of the demand of iron ore globally is also pushing prices to un-scaled heights.

Vale also announced that it was planning to double its investments in 2010 to $24 billion. Part of this money would be used to fund expansion into the fertiliser production industry.

Joel Scanlon

Written by

Joel Scanlon

Joel emigrated to Australia in 1995 and worked for five years in the mining industry as an exploration geotechnician, using GIS mapping and CAD software. Upon moving to the North Coast of NSW, Australia Joel worked as a graphic designer for a leading consultancy firm. After that, he ran a successful business providing web services to businesses along the eastern seaboard of Australia. During this time, he developed and launched News-Medical.Net. Joel has been working with AZoNetwork since the company was founded in 2000.

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