Big global investors may find out this week how Vale, the giant Brazilian miner, will handle the much-awaited sale of 10% of its base metals business.
According to Wall Street analysts the possible sale could put a value of more than $US20 billion on the business, with top forecasts around $US25 billion.
Besides being a top three global iron ore exporter, Vale is also, the world’s largest nickel producer thanks to its mines in Canada and growing investment in Indonesia.
It is also a mid-level copper producer, but has big plans to boost production over the next seven years.
It has been talking for months about the sale of a minority stake in its base metals business to automakers, pension funds or sovereign wealth funds.
Reuters says Brazilian and now global media, are saying that vale will reveal a decision on Thursday, May 25 – the company’s website though does not show any advisory head up for investors.
The reports said Vale would sell 10% of the unit worth around $US2.5 billion, adding that the binding offers are likely to be discussed this Thursday by the company’s board.
Earlier this year, Vale said it expected an advance in its efforts to sell to 10% stake would come before the end of next month.
The reports suggest there could be just one investor with Canadian infrastructure and pension funds favoured because of the huge investment in and around Sudbury (Vale took over International Nickel (or Inco) for $US18.4 billion in 2006) and in the east of the country in Labrador.
Investors such as General Motors, the Saudi Arabian investment fund or the country’s newish mining company with other sovereign wealth funds are on the list of possible candidates.
Chinese investors would be interested but because relations with Canada and the US are so fraught, they would not get to the starting line
Vale operates the Voisey’s Bay mine in Labrador as well the older mines in Sudbury and associated processing facilities such as smelters and refineries.
Vale’s mines and processing operations are in, Mississauga, Sheridan Park, Sudbury, Port Colborne, Ontario; Thompson, Manitoba; and St. John’s, Voisey’s Bay and Long Harbour, Newfoundland and Labrador.
Vale is trying to imitate BHP and Rio Tinto, its big iron ore rivals, which are much more involved in renewables than Vale even though the Brazilian company has always had a huge investment in nickel and reasonable copper production (usually a by-product, along with gold).
There’s talk Vale will list the base metals business next year and the forthcoming announcement is all about selecting and naming a cornerstone investor or investors for that process in 2024.
Vale has revealed plans to nearly triple copper output to 900,000 tonnes a year by 2030 from 335,000 to 370,000 tonnes this year. The goal is to almost double nickel production at the same time to 300,000 tonnes a year from 160,000 to 175,000 tonnes in 2023.
Much of that planned increase is expected from Indonesia.
BHP will go close to producing 2 million tonnes of copper a year once its $9.6 billion cash purchase of OZ Minerals is settled. Its nickel business is much smaller than Vale’s but will grow sharply when the West Musgrave nickel- copper mine that OZ Minerals has been developing, comes on stream in 2025.
Early plans for West Musgrave are to produce around 220,000 tonnes of nickel concentrate and 110,000 of copper concentrate a year based on a throughput of around 12 million tonnes a year.