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RIO DE JANEIRO, Nov 7 (Reuters) - Brazil's Vale confirmed on Thursday it is in talks with Glencore Xstrata over potential cooperation between the mining groups' nickel operations in Canada's Sudbury basin, in an effort to cut costs as prices languish.
Vale said on Thursday it was not planning "a corporate joint venture" in Sudbury, but was looking at other options to join forces in mining, milling and smelting to save cash.
Nickel prices have fallen by around a fifth since January and are languishing around four-year lows, weighed down by oversupply.
"We are looking at the synergies now and plan to start negotiating next year," Vale's chief executive Murilo Ferreira told analysts in a quarterly earnings call, adding an eventual deal would not involve a full merger.
Reuters reported last month that Glencore and Vale had revived talks over long-debated cooperation in Sudbury, with the companies considering a number of options for their mining and processing operations in the area.
Sources familiar with the situation said then that talks were at an early stage.
"We are looking at ways to create synergies for our non-ferrous operations," Peter Poppinga, Vale's head of non-ferrous metals, said.
The two main operators in Sudbury have held talks on joining forces on more than one occasion before, both as Inco and Falconbridge and, later, as successor companies Vale and Xstrata.
Analysts have long said a tie-up would make sense for two operators mining the 60 km-long, oval-shaped formation known as the Sudbury basin.
The sources had said a tough nickel market, pressure on Vale over nickel difficulties at its Goro nickel-cobalt mine in New Caledonia and elsewhere could make a deal more likely this time than in the past. Equally, the problems across Vale's nickel division could prove distracting.
Vale, the world's second-largest nickel producer, said on Thursday it did not expect to have to take a writedown on the value of Goro.
The company is targeting 40,000 tonnes of output from Goro in 2014, "mostly refined nickel" Poppinga said, a factor that will help the mine break even. That level will be higher than the expected 60 percent refined nickel this year.
Poppinga expects Goro, also known as Vale Nova Caledonia, to produce earnings before interest, taxes, depreciation and amortization (EBITDA) of $500 million to $600 million a year over the long term.
Another of Vale's trouble-hit nickel mines, Onca Puma in northern Brazil, is ramping up and should hit 60 percent of capacity next year, it said. Vale has faced furnace design problems and was forced to shut down the operation in June 2012.
Vale took a $2.85 billion writedown on Onca Puma last year.