Vale is looking to sell its metal stake as battery demand increases

Brazilian miner Vale is in talks to sell a $2.5 billion minority stake in its metals business as it seeks to increase its copper and nickel production to meet growing energy transition demand.

Trading houses in Japan, sovereign wealth funds in the Middle East and automakers are all considering the asset with a first round of bids due in early November, according to people familiar with the situation.

Global demand for copper and nickel is expected to skyrocket as a result of the energy transition, while supply will be constrained by a lack of new mines.

Automakers in particular are vying for access to the critical metals they need for electric vehicles, and several are eyeing the deal, according to people familiar with the situation.

Tesla signed an offtake agreement with Vale for Canadian nickel this year, a sign of how the automaker is working to secure commodity supply chains outside of China.

Vale has also discussed long-term metals supply deals with other automakers, including Ford, GM and Volkswagen.

The Brazilian company has been working to transform its base metals unit, which includes copper and nickel mines in Canada and Indonesia, and appointed a new head of the unit late last year.

Vale’s base metals unit struggled with low production last year, in part because of a labor dispute in Canada and a fire at Brazil’s Salobo copper mine, but production is expected to recover this year.

Vale has retained Goldman Sachs to advise on any potential transaction, according to people familiar with discussions.

The company is in talks to sell a 10-15 percent stake in the base metals unit, a deal that bankers say is expected to be worth around $25 billion.

Although Vale is known for its extensive iron ore operations that provide a steady cash flow, it also has a significant base metals business and is the largest nickel miner outside of Asia.

The company last week reorganized the holding structure its nickel and copper assets in Brazil, a move that lays the foundation for its base metals business to be valued separately from its iron ore business.

Vale said at the time: “There is currently no decision on new transactions with [the] base metal business.

Nickel demand is largely driven by stainless steel production, but automakers and battery makers use high-grade metals for the highest-performing, longer-range lithium-ion batteries. More than half of the world’s nickel mines are Chinese-owned.

Of the battery metals, which also include cobalt, lithium and graphite, nickel faces the largest absolute increase in demand through 2030, according to the International Energy Agency.

Vale and Goldman Sachs declined to comment.

https://www.ft.com/content/9dcc68b8-7ca2-4283-9fee-736a857e1b53 Vale is looking to sell its metal stake as battery demand increases

Adam Bradshaw

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