Vale searches for partner to invest in world’s largest Nickel mine

Vale is searching for a partner to invest in one of the world’s biggest nickel mines as part of a push by its new chief executive Fabio Schvartsman to reduce debt and get to grips with underperforming assets.

The Brazilian miner is working with Scotiabank to sell a stake in Vale New Caledonia (VNC) on the remote South Pacific island of New Caledonia, according to people familiar with the process.

It has held discussions with a number of Chinese groups including Gem Co, a Shenzhen-based company that recycles and refines nickel cobalt for use in batteries, the people said.

The miner is betting the battery revolution, driven by the transition to electric vehicles and energy storage systems, will help it find a strategic investor for one of its most challenging assets.

Vale declined to comment but pointed to a recent investor presentation in which Mr Schvartsman outlined a new approach to the nickel market, including a “partnership” for its operations on New Caledonia, a French territory.

Scotiabank and Gem Co could not be immediately reached for comment.

Mr Schvartsman, previously the head of Brazil’s largest paper and cardboard producer, was named chief executive of Vale in March.

The appointment surprised many people in the mining industry who expected the Rio de Janeiro-based company to pick an insider.

Soon after joining, Mr Schvartsman launched a review of all Vale’s “low-performing assets”. He said a “60-day diagnosis” would indicate which parts of the company should “be enhanced” and those that needed “priority actions”.

Vale has ploughed billions of dollars into developing VNC, which has been dogged by technical challenges and has struggled to generate cash.

The unit is made up of the Goro mine, a processing plant and port. Last year, it produced 34,000 tonnes of finished nickel.

In a recent report, analysts at Bank of America Merrill Lynch said the economics of VNC were unsustainable without higher nickel prices or an “alternative funding source”.

Although nickel has rallied 18 per cent this year to almost $12,000 a tonne, it has still more than halved since 2011. However, analysts think better times lie ahead for the nickel market.

Nickel is one of the metals that could benefit from the green energy revolution. Nickel-manganese-cobalt (NMC) batteries are tipped to become the industry standard for electric vehicles, as they allow motorists to drive longer on a single charge.

Depending on the precise chemistries involved, there could be a need for an additional 300,000 to 900,000 tonnes per annum of incremental nickel supply by 2025, according to UBS.

To put that figure in perspective, analysts expect global refined nickel production to hit 2m tonnes this year.

The search for a strategic partner at VNC comes as Vale, the world’s biggest producer of iron ore, moves to end a controlling shareholder pact that has been in place for two decades.

Its new structure should eventually reduce government influence in the company’s management and make it more attractive to international investors, many of whom have shunned the company because of perceived links to the Brazilian state.

Aided by higher commodities prices, shares in Vale have risen 36 per cent this year, giving the company a market value of $55bn.

Ref: http://nanthavictor.com

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