Yesterday the Financial Times reported that Vale is in discussions to sell a US$2.5Bn minority stake in its metals business, as it seeks to boost its copper and nickel output to meet the growing demand for the energy transition.

Last week, Vale’s Board of Directors approved the reorganization of base metals operations held by Vale S.A in Brazil, paving the way for its base metals (copper and nickel) business to be valued separately from its iron ore activities. 

The approval provided for the transfer of the Brazilian copper assets to Salobo Metais and the transfer of Brazilian nickel assets to a new company to be established by Vale in Brazil.  For now, both copper and nickel assets will continue to be consolidated and wholly owned by Vale.

The FT noted that Vale has hired Goldman Sachs to advise on any possible transaction, thought to relate to selling a 10-15% stake in the base metals units valued in total at around US$25Bn, with the first round of bids due in November.

Vale is the world’s largest producer of nickel, with mines and refineries in Brazil, Canada, and Indonesia, as well as fully-owned and joint venture operations in China, Japan, South Korea, Taiwan, and the UK.  Several of these operations also produce cobalt.  Meanwhile, the company has copper assets in Brazil and Canada.

Last year, Vale’s base metals division produced 168kt of nickel, down 8.5% y-on-y, and 297kt of copper, down 17.6% y-on-y. The performance was affected by several one-off events, such as a labour disruption in Sudbury (nickel and cobalt) and maintenance activities in Onça-Puma, Matsuzaka (nickel) Salobo and Sossego and (copper). 

Any potential buyer would acquire a stake in some world-class operational cobalt, copper and nickel assets central to the energy transition, while presumably offering Vale cash flow to make operational improvements and increase output.