Rio de Janeiro, 25 Februry 2011

Brazilian mining giant Vale said its fourth-quarter profits nearly quadrupled to their second-highest level ever on strong iron prices driven by soaring demand from top world importer China.

"We are living our best days," CEO Roger Agnelli said in a statement. "However, given the quality of the project pipeline ... I strongly believe that even better days are still to come."

Vale , the world's largest iron ore miner, reported net income of 10.0 billion reais ($6.0 billion), up from 2.7 billion reais a year ago. The result beat analysts estimates as demand for iron remains strong among emerging markets such as China. EBITDA rose to 14.6 billion reais ($8.8 billion) from 3.7 billion.

Analysts had forecast Vale would post net income of $5.73 billion and EBITDA of $8.37 billion.

Graphic on iron ore:

http://graphics.thomsonreuters.com/310/GLOBAL_IRONORE.html

Vale received considerably higher prices for its iron ore following the switch to a quarterly pricing system from the ageing annual benchmark system in which miners and steel companies negotiated prices.

Iron ore output rose in the fourth quarter to 80.3 million tonnes, up 27 percent from the year earlier but down slightly from the previous quarter due to a seasonal output fall linked to the rainy season.

Nickel production more than doubled from the year earlier to 65,000 tonnes after the company resolved a long-running labor dispute that had slowed its Canada operations.

COMMODITIES BOOM

A boom in commodities prices and unrelenting demand from emerging markets has provided a boon for global miners including Vale and rivals BHP Billiton and Rio Tinto.

The companies have unveiled huge investment budgets and generous shareholder dividends, but also face rising political risk as governments mull royalty hikes to gain a greater part of their profits and show more willingness to block potential acquisitions.

Markets have been worried Brazil's Dilma Rousseff government could seek to push Agnelli out in favor of someone who will focus more on developing the Brazilian economy, though most analysts believe management changes will not have a profound effect on the way the firm is run.

Vale is slated to invest a record $24 billion this year to boost iron ore production and expand operations in logistics, fertilizer and copper. Vale in 2010 invested $12.7 billion, adding an additional 20 million tonnes of iron ore capacity and bringing copper, nickel and fertilizer facilities online.

Profits for the full year 2010 rose to a record 30 billion reais ($18.1 billion), nearly triple the previous year's profit. Vale's earnings have soared since it adopted the quarterly iron ore in early 2010. The benchmark system was severely weakened by the rapid rise of a spot market for iron ore in the wake of 2008 financial crisis.

Spot iron prices have topped $190 per tonne in recent week, driven both by demand and tight Indian supplies. Vale's preferred shares, the company's most widely traded class of stock, closed down slightly on Thursday at 49.25 reais in Sao Paulo.

Ends --

By Brian Ellsworth and Denise Luna, Reuters - for Commodities Now