Vale puts stake in New Caledonian nickel unit up for sale
Brazil’s Vale (NYSE:VALE) is looking to sell a stake in its loss-making New Caledonian nickel operations as part of a wider review of low performing assets after new Chief Executive Fabio Schvartsman took charge in June.
Production costs at Vale New Caledonia (VNC), one of the world’s top nickel mines, are currently are too high for it to be profitable and there has been ongoing rumours that point at the imminent closure of the operation.
According to FT.com (subs. required) the miner is working with Scotiabank and as held discussions with a number of Chinese groups including Gem Co, a Shenzhen-based company that recycles and refines nickel cobalt for use in batteries.
The company, the world’s No.1 iron ore producer, has said its goal is to slash costs to $10,500 to $11,000 a tonne at VNC by the end of the year, as it ramps up production and prices of by-product cobalt soar — it’s up 80% so far this year.
The company has already flagged its intention to halt two of its high-cost Canadian mines this year.
Nickel miners are coming under renewed pressure to cut costs or close capacity as a flood of cheap ore enters the market, hurting prices for the commodity. While the metal is up about 18% this year to roughly $12,000 a tonne, they have still more than halved since 2011.
Increasing demand for electric vehicles nickel-manganese-cobalt (NMC) batteries is expected to have a major impact on the beleaguered industry. The change won’t happen overnight, but by 2025 experts predict that batteries would account for 13% to 15% of the nickel market, with demand for the metal growing 20% in average each year until then.
Nickel mining is a key industry in New Caledonia, which holds as much as a quarter of the world’s known reserves. Vale’s plant is the second-largest employer in the southern province, with some 3,500 permanent workers and contractors.