New Century Resources (ASX: NCZ) and Vale (NYSE: VALE) have delayed the deadline for closing the sale of the Brazilian miner’s nickel and cobalt operations on the Pacific island of New Caledonia by 45 days.
The Australian zinc producer entered into a 60-day exclusivity agreement to acquire a 95% stake in Vale Nouvelle Calédonie (VNC), the operator of the troubled Goro nickel-cobalt mine in the French territory on May 26.
New Century said on Tuesday it had made “significant progress” in evaluating the technical and commercial aspects of the transaction, but has not yet completed a definitive binding agreement.
VCN has proven a financial burden for Vale since it began operations two years behind schedule in 2010.
The Rio de Janeiro-based miner first announced its intention to exit operations in New Caledonia in December. The decision came after it had to write down $1.6 billion in the fourth quarter related to the ailing mines, the world’s biggest nickel operation.
Vale cut in April its 2020 nickel production guidance to 200,000 – 210-000 tonnes per year from 240,000 tpy to account for the anticipated loss of VNC’s 60,000-tpy output.
Shortly after, the miner revealed it had received non-binding offers for VNC, which includes the Goro mine, a processing plant and the port of Prony.
The timing of this deal couldn’t be better. Tesla boss Elon Musk recently announced the company was searching for sustainable nickel supply for the batteries that power its electric vehicles (EVs)
Analysts estimate the silvery-white metal could face a shortage as soon as 2023.
The Goro operation includes a mine, processing facility and port, located on New Caledonia, a French territory which is a top nickel producing region globally.
While the mine has the capacity to produce 60,000 tpy of nickel in the form of nickel oxide, it has never performed to full capacity due to design flaws and operational commissioning issues.
Las year, Goro churned out just 23,400 tonnes of nickel, slightly over a third of its annual capacity.
“The due diligence process has outlined a logical and technically robust solution for Goro’s operation, which is expected to deliver improved production rates and reduced costs,” New Century said.
The Melbourne-based miner noted if the transaction goes through, it would become a major supplier of nickel and cobalt sourced from outside the Democratic Republic of Congo. The African country is currently the world’s biggest supplier of cobalt for the EV sector.