(Adds analyst comment, Vale debt figure)
BRASILIA, April 28 (Reuters) - Brazilian miner Vale SA on Thursday reported a first-quarter net profit of $1.78 billion, beating analyst forecasts and returning to profit for the first time in three quarters, helped by higher iron ore prices and a stronger Brazilian real.
Analysts polled by Reuters had expected a net profit of $1.06 billion.
The world's largest producer of iron ore, hurt by a slump in prices .IO62-CNI=SI, reported its largest ever loss in 2015.
But an 8.7 percent appreciation of the real against the dollar during the first quarter provided relief to the heavily indebted miner, resulting in a foreign exchange gain of $1.6 billion.
"Vale enters the second quarter with a fair amount of optimism, but we won't let down our guard," Chief Financial Officer Luciano Siani said in a video on the company's website.
Iron ore prices, which rose nearly 25 percent during the quarter, combined with lower freight rates to help Vale improve margins and generate cash.
Paul Gait, an analyst at Bernstein, pointed to Vale's earnings before interest, taxes, depreciation and amortization (EBITDA) of $2 billion as a highlight of the quarter. It rose 13 percent from a year earlier and 44 percent versus the final quarter of 2015.
"This is quite a result, driven largely by improved EBITDA margins in the iron ore business," Gait wrote in a note to clients.
But Gait expressed concern over a rise in Vale's net debt, which rose to $27.7 billion, from $25.2 billion at the end of 2015. The jump was due to the stronger real, which increased the value of Brazil-denominated debt in dollars, and iron ore sales for which payment had not yet been received.
Vale has said it will try to cut debt by $10 billion by 2017, predominantly through an aggressive program of asset sales.
The miner took a step in that direction by exiting beleaguered steel joint-venture CSA Siderurgica do Atlántico SA, selling its stake to former partner ThyssenKrupp AG for $1. Under terms of the deal, Vale would receive cash if ThyssenKrupp succeeds in selling CSA.
But Vale appeared to suffer a setback on Thursday, as Anglo American said it agreed to sell its niobium and phosphates businesses to China Molybdenum.
Reuters had reported Vale was bidding for the assets as part of a deal to spin off its own fertilizer assets into a joint venture controlled by Apollo Global Management LLC.
Reporting by Stephen Eisenhammer; Editing by Jason Neely and Frances Kerry