April 20, 2017 / 1:33 PM / 3 months ago

UPDATE 1-Vale's first-quarter output falls on weather, keeps guidance

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SAO PAULO, April 20 (Reuters) - Vale SA's first-quarter iron ore output fell 6.7 percent as seasonal rainfalls in a fast-growing mine in northern Brazil hampered extraction and the world's No. 1 producer of the raw material sought to rein in production at low-margin facilities.

In a statement on Thursday, Vale said iron ore production totaled 86.198 million tonnes last quarter, compared with 92.386 million tonnes in the prior three months. Production of pellets fell 1.6 percent to 12.422 million tonnes in the same period, while coal output climbed 54 percent to 2.434 million tonnes, the statement said.

First-quarter trends indicate that ore output could come within guidance of 360 million tonnes to 380 million tonnes this year. Vale also said production could hit a base target of 400 million tonnes or more after 2018, the statement added.

The strategy of more controlled iron ore production growth comes after prices of the mineral fell almost a quarter over the past three years. Prices fell to their weakest on record in 2015 before recovering by around 50 percent, but analysts expect ore supply to top demand for the foreseeable future.

Preferred shares, Vale's most widely traded class of stock, rose as much as 2.3 percent to 27.33 reais in early Thursday trading. The stock is up 11.7 percent this year.

Vale's global recovery metrics, or a measure of iron ore extraction productivity, rose to 49 percent at the end of March from about 44 percent a year earlier. The so-called northern system, which groups Vale's Carajás, Serra Leste e S11D mines in northern Brazil, produced a record 36 million tonnes in the first quarter despite heavy summer rains in the region.

Nickel production fell 14 percent to 71,400 tonnes from the fourth quarter, reflecting output halts in mines located in Indonesia and Japan. (Reporting by Guillermo Parra-Bernal and Gustavo Bonato; Editing by Bernard Orr)

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