RIO DE JANEIRO, Nov 7 (Reuters) - Brazilian mining company Vale is working to sell more assets outside its core business to reduce costs and control debt, Chief Executive Officer Murilo Ferreira said on Thursday.
After posting a higher-than-expected quarterly profit on Wednesday, the company sees cost cuts as a key way to maintain profitability in the long term, Ferreira said.
Net income for the third quarter more than doubled to $3.50 billion from $1.64 billion a year earlier. The result was 6 percent higher than the $3.3 billion average estimate of seven analysts surveyed by Reuters.
The company benefited from higher-than-expected iron ore demand and prices, as well as a reduction in costs.
Iron ore prices averaged about a fifth higher in the third quarter than a year earlier. Sales of iron ore and pellets increased 7 percent to 83.6 million tonnes, the third-highest quarterly amount in the company's history.
"We continue to seek to make Vale more efficient," Ferreira told analysts on a conference call on Thursday. "We are in talks to sell more assets."
Sales, general and administrative costs fell 39 percent to $315 million, while research and development fell 43 percent to $205 million.
The cost of goods sold, a category that includes salaries and equipment used to mine Vale's products, fell 3.4 percent to $6.55 billion despite rising output and sales.
Ferreira said Vale wanted to sell assets to keep its debt levels at sustainable levels, rather than to cover liabilities stemming from a long-running $15 billion dispute with the Brazilian government over the double-taxation of foreign subsidiaries.
Vale and other Brazilian companies with foreign units are negotiating with Brazil's Finance Ministry over past debts and future tax rules, Ferreira said.
Company counsel, Clove Torres, who has been taking part in the talks, said a draft of the new tax rules could be released in the coming days or weeks.
"It is essential that the new rules maintain our company's competitiveness abroad," Ferreira said.
The back tax debt is being debated by Brazil's Supreme Court.
Vale's nonvoting preferred shares, the company's most-traded class of stock, fell 1.2 percent at 34.03 reais in morning trading in Sao Paulo.
Vale said it expected iron ore prices to remain near current levels, close to $130 a tonne, for the near future, as housing construction in China sustains demand for steel, said Jose Carlos Martins, the company's head of ferrous metals and strategy.
Vale, whose ore has some of the world's highest levels of base iron and lowest levels of impurities, expects to maintain its prices with a "quality premium" that should rise in the coming quarters, especially for production from its giant, high-grade Carajas mines in Brazil's Amazon region, Martins said.
He said he expected Australia and Brazil's share of the world seaborne market to rise to about 80 percent in coming years from 60 percent to 70 percent today as the world's largest exporters of iron ore benefit from lower costs, high quality from the mines, and efficient transportation and logistics systems.
Ferreira said Vale's cash cost of iron ore after royalty payments fell to about $22 a tonne during the quarter, a level the company considers "competitive."
Iron ore in the Chinese spot market fell 0.15 percent to $136.90 a tonne on Thursday from Wednesday's two-month high, according to Steel Intelligence.