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RPT-UPDATE 2-Brazil's Vale Q3 net falls 66 pct; Guinea mine on hold

(Repeats without change to text or headline)

* Vale profit hurt by slowing economy, iron ore price

* Net income in quarter worse than expectations

* Vale puts Simandou mine project in Guinea on hold

RIO DE JANEIRO, Oct 24 (Reuters) - Brazil's Vale SA , the world's No. 2 mining company, said on Wednesday that third-quarter profit fell 66 percent compared with a year earlier after the price of iron ore dropped to three-year lows.

The result was slightly worse than the average of analysts' expectations and the company's earnings release included plans to put capital-intensive projects on hold.

Net income in the three months ending Sept. 30 was $1.67 billion, compared with $4.94 billion a year earlier, Vale said in a statement. Vale is the world's largest producer of iron ore, the main ingredient in steel.

The average profit estimate of 19 analysts surveyed by Reuters was $1.92 billion. Profit fell 37 percent compared with the second quarter.

``Vale's performance in the third quarter reflected the challenges resulting from volatility of falling prices that happened as a result of the slowing of growth in the world economy,'' the company said in the statement.

Falling prices and weak demand in China, Vale's largest market, have led the Rio de Janeiro-based company to delay spending, close operations and consider cuts to investments and dividends. The third-quarter result was the worst in nearly three years.

Net sales, or total sales minus sales taxes, fell 34 percent to $10.7 billion. The average net sales estimate in the survey was $10.4 billion.

Iron ore , responsible for about 90 percent of Vale profit, averaged $112.12 a tonne in the quarter, 36 percent less than a year earlier. The price of iron ore, the main steel ingredient, fell to a three-year low of $86.70 a tonne on Sept. 5. Vale iron ore output fell 4.5 percent from the third quarter last year.

The expected sales drop hurt the outlook for earnings before interest, taxes, depreciation and amortization, or EBITDA, a gauge of operational profitability. EBITDA adjusted for non-recurring items fell 62 percent to 3.74 billion reais, the statement said, more than analysts expected.

The average analyst estimate was for EBITDA to fall 58 percent.

EBITDA as a percentage of sales fell to 35 percent from 59 percent a year ago.

GUINEA MINE ON HOLD

The impact of the company's weak sales and operational profitability could be large when a review of investment plans is announced in December.

Chief Executive Murilo Ferreira has already put investments in Canada and Brazil on hold. On Oct. 4 the company said it suspended operations at three Brazilian iron ore pellet plants.

On Wednesday, the company's earnings report added the giant Simandou high-grade iron ore deposit in the West African nation of Guinea to the list of projects moved to the bottom of the spending list.

Vale said in July that the $1.3 billion Zogota mine in the Simandou area was to have started output by the end of 2012. Its latest earnings statement said that the Zogota mine's scope and timetable are now under review. It gave no date for a startup.

Reuters reported on Sept. 26 that the company might suspend the project.

Profit was also hurt by the company's decision to set aside about $542 million for the possible payment of back royalties in a dispute with Brazil's government.

Vale preferred shares, the company's most-traded class of stock, fell 0.8 percent to 34.29 on the Sao Paulo BM&FBovespa exchange on Wednesday before the results were announced.

(Reporting by Jeb Blount and Sabrina Lorenzi; Editing by Jim Marshall, Gary Hill)