* Mining veteran Ferreira to replace Agnelli as Vale CEO
* Emerges as compromise pick amid state meddling in Vale
* Faces delicate balancing act to please govt, holders
* Reputation enhanced after integration of Inco in 2006
By Guillermo Parra-Bernal and Brian Ellsworth
SAO PAULO/RIO DE JANEIRO, April 5 (Reuters) - Murilo Ferreira, the future chief executive of Brazilian mining giant Vale, faces a delicate balancing act to satisfy the company's investors and the politicians that pushed out his predecessor.
Fortunately for him, his background alone should win him points with both sides.
The 58-year-old mining veteran's repeated clashes, when head of Vale's Canada unit, with outgoing CEO Roger Agnelli will likely endear him to the government of President Dilma Rousseff, who led a campaign to oust Agnelli on charges he was doing little to help Brazil's steelmaking and shipbuilding sectors.
Ferreira's extensive experience at the world's biggest iron ore producer should relieve investors who have for weeks worried that Rousseff would seek to install a politician appointee who would put social development goals above profits.
The soft-spoken business administrator established a reputation as a cost-conscious manager by quickly integrating Canadian nickel producer Inco into Vale's overall operations after Vale bought Inco in 2006.
"He is tough and sharp -- he knows what he's doing," said one former Vale employee who asked not to be identified.
Vale's non-voting shares, the company's most widely traded class of stock, have shed almost 10 percent since mid-January, when speculation over Agnelli's departure mounted.
That reflects concern over the risk of "increasingly non-business related decisions being made, leading to higher costs and lower returns", according to Fraser Phillips, an analyst with RBC Dominion Securities in Toronto.
According to sources close to Ferreira, he saw Agnelli as a leader that offered little room for internal dissent and centralized power within the company, straining ties with national politicians, regional leaders, and local communities.
Ferreira reportedly opposed Agnelli's bid to buy out rival miner Xstrata because the Swiss mining company's mix of high quality and low quality assets made the purchase risky.
Vale's bid for Xstrata ultimately failed just before the 2008 financial crisis, avoiding enormous financial headaches for Vale.
Until the start of the year, Ferreira was a founding partner of Rio de Janeiro-based hedge fund Studio Investimentos. He founded the firm with a former colleague from Vale and other industry contacts after quitting the company early in 2009.
GOVERNMENT RELATIONS
Ferreira's immediate challenge is to fend off government pressure for Vale's involvement in steel projects, popular among politicians because they create jobs but unattractive to Vale because of the lower returns on offer.
He will also have to seek a quick resolution to a dispute with the government over a mining royalties debt that state officials says could reach $2.4 billion.
During his 10-year stint at Vale that began in 1998, Ferreira presided over the firm's aluminum unit Aluvale and was later responsible for seeking expansion opportunities around the globe as head of Vale's mergers and acquisitions division.
People with knowledge of the situation say that Ferreira rushed to trim costs at Inco after Vale took control, cutting lavish expenses by Inco's directors and streamlining the company's structure.
Ferreira "can be considered an internal candidate, bringing the least disruption to Vale, and can ease the concerns of a higher government intervention", Bank of America Merrill Lynch analyst Felipe Hirai said on Tuesday.
He could help rebuild relations between Vale, the government and customers, and still attain Agnelli's target of making Vale the world's largest diversified miner in a few years, Hirai noted.
Ferreira's designation came as a surprise following reports in recent days that Tito Martins, currently head of Vale Canada, was the top name for the job. Former Vale chairman Sergio Rosa, paper and pulp executives and even the chairman of Banco Santander Brasil, Fabio Barbosa, were also target of speculation as contenders for the job. (Additional reporting by Denise Luna in Rio de Janeiro; Editing by Mike Nesbit)