Vale looks for smaller targets

By Reese Ewing

SAO PAULO (Reuters) - Mining giant Vale (VALE5.SA: Quote, Profile, Research) is bullish on demand, despite fears of an economic slowdown, and plans to improve the company's market position by combining small to medium-sized acquisitions with internal growth, the company's chief executive said on Thursday.

After getting bogged down this year in takeover talks that ultimately collapsed with large Swiss rival Xstrata (XTA.L: Quote, Profile, Research), Vale CEO Roger Agnelli said his team was poring over several possible acquisitions, but the company's strategy would focus on smaller targets.

"I remain very optimistic about the sector into the medium and long term. But we're not going to make any moves simply to just be big," Agnelli said on a conference call with investors about the company's quarterly earnings. "We want to remain agile for opportunities as they arise."

Robust demand for metals, especially from China, boosted Vale's net income 22 percent in the second quarter from a year earlier, to a record $5 billion (2.57 billion pounds).

Vale (RIO.N: Quote, Profile, Research) is the world's largest iron ore miner and is actively attempting to improve its market position by diversifying its portfolio into other metals. It recently acquired control of Canadian nickel miner Inco, but iron ore still accounts for almost 70 percent of its revenues.

World metal prices have fallen off highs and futures contracts for nickel, which accounts for almost 27 percent of Vale's revenues, are trading at less than half their peak in April.

But Agnelli and other leaders in the metals sector, such as Xstrata, remain bullish about strong demand. Xstrata said on Wednesday it planned a $10 billion cash bid for South African-focused platinum producer Lonmin (LMI.L: Quote, Profile, Research).

"We're not looking for any large acquisitions," Agnelli said. "We're looking for smaller, medium acquisitions that would improve our market position."  Continued...