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Vale flags Samarco iron ore ops may restart by 2018-end

Vale SA executives said during a Feb. 28 conference call for its 2017 results that the Samarco iron ore mine in Brazil may resume operations by the end of 2018 or in early 2019, but warned that the process hinges on securing environmental licenses, Reuters reported.

The company booked a net income of US$771 million in the fourth quarter of 2017, up from a year-ago net income of US$525 million, with annual net income increasing to US$5.51 billion from US$3.98 billion in 2016 on the back of the group's cash generation and net debt reduction efforts.

The mine, which is a joint venture with BHP Billiton Group, halted operations in November 2015 after a deadly tailings dam burst.

"We are trying everything that we can to make the restart of the plant, of the mill, feasible," said CEO Fabio Schvartsman.

The miner is aiming for base metals to account for at least 30% of its financial results by the end of 2019, as part of its diversification from the iron ore business.

Vale is aiming at more than US$150 million in cost reductions over the next two years, said the executives.

Meanwhile, the company will cut costs to the tune of around US$200 million across its nickel operations this year, said CFO Luciano Siani Pires. The company will also halt new investment in its nickel assets, Reuters cited the executives as saying.

"We are planning to have in 2018 10% less cost in all of our nickel operations and this is way more than [US]$150 million," added Schvartsman. The company had earlier cut its nickel production forecast by 15% this year.

The miner expects to reach a decision on its New Caledonia nickel operation by the end of the year, with all options to be considered, Reuters cited Schvartsman as saying.

Company optimistic

Schvartsman added that the recent improvement in the prices has made the company more optimistic over New Caledonia.

"It's clear that the situation now is different from where we were [six] months ago," he said, adding that the company is "waiting to see where things are going to move forward in order to make a decision" on the asset.

He noted that the company brought in Eduardo de Salles Bartolomeo as head of its base metals division with the purpose of restructuring it, and focus on Sudbury and New Caledonia operations to extract more value. It aims to shift New Caledonia into profitable operation.

"The purpose is to be cash positive in all our operations," Schvartsman said, adding that Vale has achieved this "for the first time ever" in the last two months.

The company is moving forward with an expansion plan for the Salobo copper project in Brazil and will go to the board at the end of the year, said Peter Poppinga, executive director ferrous minerals and coal, while responding to a question.

The company anticipates to deliver a new dividend policy by the end of March, said Schvartsman. The new policy is expected to be expressed as a proportion of its cash flow generation.