Vale Scales Down Investment Spend

Brazilian miner Vale expects to cut 2009 planned capital spending by 37%, to $9.04bn from $14.24bn, due to falling costs and a stronger dollar. The new budget sees $6.96bn for organic growth – including $5.93bn in projects – and some $2.07bn for existing operations. Vale has indicated that global investments in the mining industry would probably fall 55% percent to around $50bn billion this year due to the economic slowdown. UBS expects M&A activity to pick up this year, which should support Vale’s cashflow and capex spending. “Overall, capex plans do not worry us, but we remain wary of Vale’s M&A plans. The company has made a couple of small acquisitions this year, but its diversification goals and unleveraged balance sheet still imply risks of larger acquisitions in the future,” UBS says.