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DAILY NEWS Dec 21, 2012 5:32 PM - 0 comments

Vale takes hefty write-downs

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 Vale (VALE-N) is taking a US$2.85 billion write-down on its Onça Puma nickel mine in the northern Brazilian state of Para after troubles with two furnaces earlier this year led to the halting of its ferronickel operations in June. As of Sept. 30, the book value of Onça Puma was US$3.78 billion.

The Brazilian mining giant also blames downward volatility of aluminium prices and macroeconomic uncertainty in Europe for slicing the market value of its 22% stake in Hydro ASA to a level below its books value, leading to a US$1.3 billion write-down.

Altogether,  Vale’s write-downs in the fourth quarter add up to US$4.2 billion.

At Onça Puma, Vale decided to rebuild one of the furnaces at a cost of about US$188 million, which it plans to start in the fourth quarter of 2013.

Nevertheless, Vale says it remains confident of  “the long-term market fundamentals of the global nickel market” and also believes its Hydro assets have the potential to “create significant shareholder value as a consequence of a unique combination of a rich endowment of natural resources and technological leadership in aluminum.”

Vale says both impairments will not have an impact on cash flow and will be treated as exceptional items.

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