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Vale to spin off, sell stake in metals business

Brazilian mining giant Vale has confirmed that it will separate its copper, nickel and other metals business and sell a 10% stake in it to an outside shareholder.

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Vale indicated at its annual investor day briefing in New York Wednesday that it will locate the new subsidiary outside of Brazil, with the most logical place for to be based being Canada, where most of its non-iron ore assets are located.

The separation will take place in the first half of 2023, Vale Chief Financial Officer Gustavo Pimenta said on Wednesday. He indicated the talks were ‘advanced’ with the partner to be revealed early next year as well.

The new business will be called Vale Base Metals.

Pimenta told investors during a meeting at the New York Stock Exchange that Brazil’s Vale will sell only 10% of the new base metals unit to the partner of choice and will retain the remaining 90% so as to have control over the decisions for the venture.

The new company will have an estimated asset base of $US20 billion and will manage the nickel and copper projects in Brazil, Canada and Indonesia.

Pimenta said the key quality Vale is looking for when deciding on a partner is expertise.

“We will change the way we manage base metals. We are looking to bring people with the capability to advise the board on investment decisions,” he said after the meeting.

Vale’s best assets are in Canada and based on the old nickel and copper operations of Inco which value bought 16 years ago for $US19.4 billion.

Pimenta did not give financial details of the deal, or any comment on how much the 10% share would cost. He said more information on the modelling of the business would be available to the market in the first quarter of 2023.

Nickel and copper assets in Canada, Brazil and Indonesia accounted for almost 15% of Vale’s revenue last year. After enduring a series of operational setbacks in recent years that led to guidance cuts, Vale has been working to stabilize its base metal production.

Vale expects nickel production to reach 230,000-245,000 metric tons a year in the mid-term, and surpass 300,000 tons from 2030. Copper output is set to triple from current levels to about 900,000 tons by 2030.

The Brazilian mining giant aims to be a major supplier for the electric-vehicle market. It signed a nickel contract for Tesla Inc. batteries, and has Ford Motor Co. as a partner in developing nickel in Indonesia.

Vale is particularly looking to be well placed to supply the EV growth in North America from Canada because of the North American free trade agreement. It has already sign deals with a number of car and battery makers.

Demand for copper is also expected to rise globally due to the energy transition towards more electrification.

The company’s nickel businesses in New Caledonia and Indonesia will give it entry into the huge markets of Asia, especially China.

In reality, Vale’s move is a catch up to what its iron ore rivals BHP, Rio Tinto and Fortescue have been doing now for several years – especially BHP with its big spending on its Nickel West business and near $10 billion bid for OZ Minerals.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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