(Adds comments from conference call, analyst view)
By Stephen Eisenhammer and Marta Nogueira
RIO DE JANEIRO, Oct 22 (Reuters) - Brazilian miner Vale SA on Thursday posted a net loss of $2.1 billion in the third quarter due to low iron ore and nickel prices and a weakening real against the dollar.
The result was slightly less than analysts forecast, and shares in Vale rose by 2 percent in morning trade as investors responded favorably to the world's No.1 iron ore miner cutting production costs and debt.
Vale produced a record amount of iron ore during the period and reduced cash costs to $12.70 a tonne, which it says is the lowest in the industry.
Despite rising production, Thursday's loss is Vale's fourth in five quarters. The company is struggling to absorb the cost of building a giant new mine in Brazil's Amazon region as its cash take drops. The miner posted net revenue of $6.51 billion and adjusted EBITDA of $1.88 billion.
On top of a falling iron ore price .IO62-CNI=SI, now just a quarter of a 2011 high of nearly $200 a tonne, Vale said it lost $6.2 billion due to the weakening Brazilian real against the dollar and other currencies. The real weakened 28 percent against the dollar over the quarter.
The exchange rate move increased the local-currency value of Vale's foreign-currency debts and "our income statement is recording that increase as a loss," Chief Financial Officer Luciano Siani said in a video on the miner's website. "That answers why we had such a big loss in the quarter."
Despite the currency-related, non-cash loss, Siani said Vale's total debt in dollars actually decreased over the period. He pointed to the company's record iron ore production in the quarter as evidence of good operational health.
Citi analysts called a $2.3 billion debt reduction a bright spot for the quarter.
Vale's flagship investment, a new iron ore mine in the Amazon that is currently the industry's largest project, is 75 percent finished, Siani said. An expansion of the related railway and port is 50 percent complete.
The project, known as S11D, will add 90 million tonnes of low cost, high-grade iron ore to Vale's annual production. With a $17 billion price tag, it is seen as vital for securing Vale's future but is weighing on results at present.
With S11D, Vale's head of iron ore Peter Poppinga said production costs would continue to fall. "It is easy to imagine Vale having average production costs of $10 per tonne," he said. (Reporting by Stephen Eisenhammer; Editing by Jason Neely, William Hardy and W Simon)