Vale posts $3.2 bln loss on iron ore's relentless fall

(Adds investment costs, quote)

By Stephen Eisenhammer

RIO DE JANEIRO, April 30 (Reuters) - Brazil's Vale SA , the world's No. 1 producer of iron ore, on Thursday posted its third straight quarterly loss under pressure from falling prices of the commodity as demand growth from China slows.

The miner reported a net loss of $3.2 billion in the first quarter, compared with a net profit of $2.4 billion in the same period last year. The result compares with a forecast net loss of $2.4 billion according to a Reuters poll.

The first-quarter loss was wider than that in the third and fourth quarters of last year.

Vale has been hit by a tumble in the price of the main steel-making ingredient , which is near its lowest in a decade having fallen 47 percent in the past 12 months.

Prices have fallen due to huge new capacity from Brazil and Australia that is beginning to flood the market, just as growth slows of Chinese demand for steel.

As well as weaker iron ore prices, Vale said the depreciation of the Brazilian real against the dollar had cost the company $3.02 billion in the quarter.

The loss comes despite raising $1 billion through the sales of a gold-streaming contract and a stake in the Belo Monte hydroelectric dam in Brazil's Amazon in the quarter.

Vale reported adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $1.6 billion, a fall of 60.5 percent on the same period last year.

Australian rivals BHP Billiton (NYSE: BBL - news) and Rio Tinto (Xetra: 855018 - news) have held up better in the price slump, partly because of lower costs, but also because they are having to invest less. Unlike Vale, their expansion projects are largely completed.

Vale is in the midst of building a huge new iron ore mine in the Amazon, the largest project in its history. Total (Swiss: FP.SW - news) investments in the first quarter were $2.2 billion.

"We remain confident that we will be able to keep absolute debt levels stable through the successful execution of our divestment program and further capital discipline," the company said in a statement.

A hedging program meant the company did not get as big a boost from lower oil prices as some analysts had expected, with freight costs falling just $2.2 per tonne, compared with the previous quarter, to $19.5 per tonne.

The hedge cost Vale about $2.3 per tonne as it settled derivative contracts for bunker fuel used in shipping.

(Additional reporting by Jeb Blount; Editing by David Holmes and W Simon)