MercoPress. South Atlantic News Agency

Lula da Silva wants control over world largest iron-ore producer

Vale’s CEO Roger Agnelli decision to cut jobs and investments did not satisfy the Brazilian president

Brazilian President Lula da Silva wants the government to take control of Vale SA, according to the weekly magazine Veja. However the origin of the information was not revealed.

Allegedly Lula da Silva asked officials to find a legal way to ensure the government controls Vale through Previ and BNDES Participacoes SA, the investment arm of Brazil’s state development bank, the Sao Paulo-based Veja said.

Vale is the world’s biggest iron-ore producer. Lula da Silva considered job cuts and trims to the company’s investment plans that were carried out by Chief Executive Officer Roger Agnelli as unnecessary, the magazine said, without providing details.

Valepar SA, the company that controls Vale, is owned by Previ, the employee pension fund of state-controlled Banco do Brasil SA; Brandespar SA, an industrial holding company; Mitsui &Co, Japan’s second-largest trading company; and BNDES Participacoes SA.

Vale announced this week that second-quarter profits tumbled 84% versus the year earlier period as lower iron ore production and prices pushed earnings to around half of what analysts had projected.

Demand for iron ore remained weak during the quarter as the global economy struggled to recover from the 2008 financial meltdown, lumbering Vale with lower prices for its main product and fewer places to sell it.

Vale, the world’s biggest iron ore producer, posted net profits of 790 million USD compared with 5.01 billion at the height of the commodities boom a year earlier, reflecting the effects of the financial crisis.

In related news Vale reported on Friday the discovery of hydrocarbons in an exploratory block off Brazil's south-eastern coast. The hydrocarbons were located in the Vampira exploration well in the Santos Basin, Vale said.

The mining company said traces of light oil and natural gas were found in the Vampira well and that the exact volume will known after further tests. Last May the company announced the discovery of natural gas in the Panoramix well, also in the same exploratory block.

Vale has a 12.5% participation in the block's exploration consortium. Brazil's giant Petrobras has 35%, while Spain's Repsol, the block's operator, has 40% and Australia's Woodside has 12.5%.