RIO Rio Tinto Plc

RIO DE JANEIRO—Brazilian mining giant Vale SA became the first of the so-called Big Three iron-ore producers to put core assets on the block as it seeks to reduce high debt levels amid the commodity downturn.

Chief Executive Murilo Ferreira said Thursday in a conference call that Vale wants to reduce its net debt to $15 billion within 18 months, from $25.23 billion at the end of the fourth quarter. But given the uncertain outlook for prices of iron ore and other raw materials, Vale is "actively exploring more aggressive actions for this deleveraging, including the sale of core assets," Mr. Ferreira said.

"We aren't attached to assets in any commodity, and we will evaluate all options," he said.

The largest producer of iron ore and nickel, Vale had long vowed to hold on to world-class operations in these and other key areas. Its biggest rivals in the global iron-ore trade, London-based Rio Tinto PLC and Australia's BHP Billiton Ltd., haven't opened the door to selling core assets.

But around the world, mining companies are considering moves they once said were unthinkable. With the global commodity slump entering its fifth year, firms are being forced to look for new ways to shore up balance sheets burdened by debt they incurred when times were better.

Phoenix-based Freeport-McMoRan Inc. said Feb. 15 that it reached a deal to sell a $1 billion stake in one of its best copper mines to pay back creditors. London-based Anglo American PLC said last week that it would consider selling its $13.5 billion Minas-Rio iron-ore project in Brazil—an operation once envisioned as key to the company's future—in two or three years.

Mr. Ferreira's comments mark a sharp departure from his prior strategy of offering assets only in peripheral businesses such as energy and logistics. Vale previously assured investors that its cash flow would exceed capital spending after the company finished work on major expansion projects such as its $14 billion S11D mine in the Brazilian Amazon, enabling it to pay down debt.

But low commodity prices hit Vale hard in 2015, forcing the company to cough up $9.37 billion in write-downs en route to a $12.13 billion net loss—the largest ever posted by a Brazilian company, according to investment-analysis firm Economatica.

For the fourth quarter, Vale's net loss widened to $8.57 billion from a loss of $1.85 billion a year earlier, the company reported on Thursday. Net operating revenue was $5.9 billion in the fourth quarter, down drastically from $9 billion. For the year, net revenue was $25.6 billion, down from $37.5 billion the year before.

To make matters worse, a tailings dam at one of Vale's joint ventures, Samarco Mineraç ã o SA, catastrophically failed on Nov. 5, causing investors to flee the company's stocks and bonds.

Once Brazil's highest-rate corporate debt issuer, Vale suddenly found itself virtually shut out of low-interest bond markets and in January needed to draw $3 billion from its revolving credit facilities.

"We know 2015 was a very challenging year and we recognize that the sharper drop in commodities prices forecast by some observers may present a challenge to our goal of deleveraging Vale after the conclusion of S11D," Mr. Ferreira said.

At current iron-ore prices around $48 per ton, Vale could reach its deleveraging target in 2019 or 2020, Mr. Ferreira said, when S11D should be fully operational. "But we have to be prepared for more unfavorable scenarios," he added.

The company isn't considering a capital increase "at this moment," Mr. Ferreira said.

Vale also announced that its chairman of the board has been replaced. The company's top board post will be assumed by Gueitiro Matsuo Genso with immediate effect, replacing Dan Conrado, who will continue to be a member of the Vale board.

Scott Patterson contributed to this article.

Write to Paul Kiernan at paul.kiernan@wsj.com and Rogerio Jelmayer at rogerio.jelmayer@wsj.com

(END) Dow Jones Newswires

February 25, 2016 13:05 ET (18:05 GMT)

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