Vale seeks to sell metals stake as battery demand soars

Brazilian mining company Vale is in discussions to sell a $2.5bn minority stake in its metals business, as it seeks to boost its copper and nickel output to meet growing demand for the energy transition.

Trading houses in Japan, sovereign wealth funds in the Middle East and car companies are examining the asset, according to people familiar with the situation, with a first round of bids due at the beginning of November.

Global demand for copper and nickel is forecast to soar as a result of the energy transition, while supply will be constrained because of a scarcity of new mines.

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

Tesla this year signed an offtake agreement with Vale for nickel from Canada, a sign of how the carmaker is working to secure raw materials supply chains outside China.

Vale has also discussed long-term supply contracts for metals with other car companies, 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 output last year, partly because of a labour dispute in Canada and a fire at the Salobo copper mine in Brazil, but production is expected to recover this year.

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

The company is in talks over selling a 10-15 per cent stake in the base metals unit, a business likely to be valued at about $25bn, according to bankers.

Although Vale is known for its vast iron ore operations, which provide a steady stream of cash, it also has a significant base metals business and is the biggest nickel miner outside Asia.

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

Vale said at the time that “there is currently no decision regarding new transactions with [the] base metals business”.

Nickel demand is largely driven by stainless steel production but car companies and battery producers use high grades of the metal for the most powerful lithium-ion batteries with longer range. More than half of the world’s nickel mines are Chinese-owned.

Nickel faces the largest absolute increase in demand by 2030 out of the battery metals, which also include cobalt, lithium and graphite, according to the International Energy Agency.

Vale and Goldman Sachs declined to comment.