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Vale to miss FY'17 iron ore output target due to supply chain optimization, inventory cuts

'sefforts to cut iron ore inventory and optimize the supply chain will continuethrough 2017, resulting in lower production than the guidance range of 380million tonnes to 400 million tonnes.

In its second-quarter production report, the iron ore majorreaffirmed that itsiron ore production for the full year is expected to be at the bottom end ofits original guidance range of 340 million tonnes to 350 million tonnes as itlooks to cut production from low-margin operations.

Second-quarter iron ore production dropped 2.8% year overyear to 86.8 million tonnes as good performance at the was offset bythe company's focus on margin optimization and the in run-of-mine production from theSamarco mine inBrazil.

Excluding Samarco's attributable output, pellets productionwas down 18% at 10 million tonnes due to the suspension of the pelletizing plant asenvironmental permits for the expansion of nearby mines were delayed andscheduled maintenance at the Tubarão plants.

Nickel production achieved a record for a second quarter at78,500 tonnes, an increase of 11,400 tonnes, mainly due to the strongoperational performance from PTVale Indonesia Tbk and higher production of its operations inCanada and Vale NewCaledonia.

Copper and gold output during the quarter also set recordsat 107,400 tonnes and 109,000 ounces, respectively. The higher copper productionwas due to better operational performance at Sudbury and the successful ramp-upof the Saloboproject in Brazil.

In the three-month period, coal output declined by over 25%on a yearly basis to 1.5 million tonnes, mainly due to lower production atCarboroughDowns in Queensland, Australia, because of roof falls.

The company has stopped underground production at CarboroughDowns, which affected the ability to meet various sales contract obligationsand resulted in a declaration of force majeure on July 8.

Quarterly cobalt production totaled 1,312 tonnes, 16.9%higher than the year-ago quarter, driven by higher production from Sudbury andVale New Caledonia.

Platinum production rose 6.5% to 49,000 ounces and palladiumproduction was down 12.8% at 95,000 ounces.

Second-quarter potash production decreased 9.8% to 101,000tonnes compared to the same quarter of 2015 due to an unscheduled maintenancestoppage at the Taquari-Vassouras project's beneficiation plant andlower grade of ore.

Phosphate rock output was 14.6% lower year over year at 1.8million tonnes due to lower production in Brazil, which was partially offset bylower production in Peru.

Manganese ore production during the quarter was slightlylower from the 2015 second quarter at about 553,000 tonnes.