Vale weighs offers for stake in base metals business

Vale has received multiple bids for a stake in its base metals business after talks with parties from carmakers to sovereign wealth funds, its chief executive said, as he predicted the division could become “even bigger” than the Brazilian mining group itself.

Eduardo Bartolomeo said “non-binding offers” had been made for the slice of up to 10 per cent of the unit, which produces materials vital for the energy transition and is being carved out as a standalone entity separate from Vale’s main iron ore operations.

He told the Financial Times the partner could be an automotive manufacturer, industrial group, state investor or pension fund. “That’s who I’m talking to,” he said. “Everybody.”

Vale is also in discussions about bringing a carmaker on to its board, Bartolomeo added, without providing further details.

Iron ore provides 80 per cent of revenues at Vale, whose $79bn market capitalisation makes it the biggest publicly listed company in Latin America.

But Bartolomeo said the base metals business — which includes nickel mines in Canada and Indonesia, copper mines in Brazil, and interests in cobalt and platinum group metals — could one day outgrow its parent and float on the stock market.

“Fundamentally we want to ringfence this business,” Bartolomeo said. “This thing can get even bigger than Vale. Not tomorrow, not even next year — when you look long-term.”

Analysts at RBC valued the Vale base metals unit at $22.3bn in a recent research note. However, the gloomy global economic outlook, which has weighed on copper prices, could make that difficult to achieve.

Share prices for major mining companies have mostly risen over the past year as demand for energy transition metals has grown. Vale’s São Paulo-traded stock has climbed 17 per cent.

Following a dam disaster in its homeland in 2019 that left 270 people dead, and as China’s once-insatiable demand for iron ore starts to cool, the Brazilian miner is increasingly focused on repositioning itself toward metals with greater growth potential.

“This is a supercycle,” said Bartolomeo, referring to the metals needed for the electrification of transport and power. “What you’re looking at in nickel, that is a supercycle.”

While Vale had previously signalled it might have an investment partner lined up by early December, the timing has slipped and the deal is expected during the first half of this year.

The carve-out of the base metals business would still proceed even if a suitable partner was not found, Bartolomeo said.

The new investor will not be a mining company, which rules out rivals such as BHP or Rio Tinto that are also trying to diversify away from iron ore, the main ingredient in steel.

An offtake agreement, in which Vale supplies metals on a long-term basis, could be part of the new investment arrangement, he added. Vale already has agreements in place to provide nickel for batteries to Ford and Tesla.

Bartolomeo insisted Vale was not concerned with reclaiming its crown as the world’s biggest producer of iron ore, and was instead focused on expanding in value-added forms of the mineral, such as hot briquetted iron.

“We want to be a niche player in the high end,” said Bartolomeo. “For us, being the largest is not an issue.”

With Beijing lifting Covid-19 restrictions, Bartolomeo added that he was “cautiously optimistic” about China, which accounts for about half the world’s steel production.