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Vale to use cash flow in dividends after achieving US$10B debt target by 2019

Vale SA plans to distribute all of its cash flow in dividends following the achievement of its US$10 billion debt target, CFO Luciano Siani Pires said at the investor day event in London.

The company will bring its net debt down to US$10 billion in 2018 from the current levels of US$21 billion, and starting 2019 it is hoping to adopt a normalized dividend policy.

While responding to a question, CEO Fabio Schvartsman said that Vale plans to off-load a 20% to 40% stake in its New Caledonia nickel operation.

The company is aiming to close the stake sale by 2018. If the company fails to find a buyer for New Caledonia, it will move to mothball the mine.

He said that several parties are in negotiations for the potential stake sale, including Chinese groups.

The company is also looking to achieve between US$1.2 billion and US$2 billion of cost reductions by 2020.

CapEx forecast was also trimmed to US$3.8 billion in 2018, from the current year's CapEx of US$4.1 billion, the executive noted.

Copper production at the miner is seen declining to 422,000 tonnes in 2018 from 438,000 tonnes forecast this year, with output gradually rising to 438,000 tonnes by 2021.

Vale expects to produce 390 million tonnes of iron ore next year, and output is capped at 400 million tonnes over the following four years.

The miner said earlier that it will lift its iron ore pellet output to about 55 million tonnes in 2018, compared to 50 million tonnes this year, and will reduce nickel production by 15% to 263,000 tonnes.

Schvartsman added that the company is in talks with potential joint venture partners for the development of its Pomalaa and Bahodopi nickel projects in Indonesia.