Vale Posts Record Q2 Iron Ore Production

Brazilian miner Vale said on Thursday its iron ore output in the second quarter was a record high for the period, up 12.6 percent from a year earlier, as it ramped up production to win back market share from Australian rivals.

Vale's preferred shares, the company's most traded class of stock, were up 1 percent in early trade in Sao Paulo, looking on track for their biggest gain in a week.

The world's mining giants Vale, Rio Tinto (RTNTF) and BHP Billiton (BHPLF) are all increasing iron ore capacity in a move expected to squeeze higher-cost producers out of the market.

But the impact of record production figures will be largely offset by a sharp decline in the price of iron ore, which fell to 22-month lows during the period.

Vale produced 79.45 million tonnes of iron ore in the three months ended June 30. The record result was due to improved weather conditions and the ramping up of production at the company's flagship Carajas mine in Brazil's Amazon as well as at its mines in the southern highland state of Minas Gerais.

Nickel production fell to 61,700 tonnes from 68,000 metric tons in the previous quarter due to maintenance at its Sudbury operations in Canada. Its VNC project on the French Pacific island of New Caledonia suspended operations after an acid spill in May.

The price of nickel, used to make steel rust-resistant, has risen by about a fifth since April due to a ban on nickel ore exports from Indonesia.

Vale said coal output fell 7.1 percent to 2.21 million tonnes from 2.38 million tonnes a year earlier.

(By Stephen Eisenhammer, Editing by Peter Galloway)