Vale intends to separate its base metal business
Around the midpoint of 2023, Brazil-based mining company Vale plans to split off its base metal operations into a separate company from its core iron ore business. Its nickel operations in Canada will be impacted by this decision, including those in Sudbury, Ontario; Thompson, Manitoba; and Voisey's Bay, Newfoundland and Labrador.
Who
Vale executives announced the news at a New York investor day. Initial plans for the new organization call for the appointment of a separate board of directors that will include the CEO of Vale and other experts in electric vehicles. In order to secure the billions of dollars in capital investments necessary to maximize its base metal assets, Vale is also looking for a minority partner.
Why it matters
The primary base metals Vale produces – nickel and copper – are projected to see a spike in demand as the energy revolution accelerates and more people switch to electric vehicles. Executives from Vale, however, emphasized that in order to take advantage of this chance, they must make sure that its base metals businesses receive adequate funding and are not overlooked in favour of the company's much larger iron ore sector. The company said it is looking to more than double its mineral exploration expenditures, which include iron ore as well as base metals, from USD 170 million in 2022 to USD 350 million by 2026. The base metal operations can obtain financing and be fully valued on their own if they are broken off into a separate corporation. By 2030, Vale wants to increase annual nickel production from the 180 kilotonnes projected for 2022 to more than 300 kilotonnes. Additionally, it plans to increase copper production from 260 kilotonnes this year to 900 kilotonnes by 2030.
"Vale's split could be linked to its management and key shareholders' desire to reduce risks associated with fluctuations in base metal prices following the recent sale of the loss-making Goro mining complex in New Caledonia. At the same time, the remaining Vale assets have varying cost and income margins, affecting the company's overall profitability.
Despite plans to increase copper and nickel output, Vale's ‘separation’ will have little impact on the base metals market. Mining and geological conditions at the deposits it exploits may however prove to be far more complicated than they are now and, as a result, ore output may be lower, in turn affecting base metal output.
Vale will almost certainly not be able to displace Norilsk Nickel on the global market due to the latter’s superior position. This is especially noticeable in the case of nickel, where the Russian behemoth finds it much easier to deliver to China than Vale due to shorter logistics routes" - Expert comment by Leonid Khazanov / Consultant – Metals and technologies.
