Vale’s plan to turn around $40 billion copper-nickel unit suffers fresh blow

Vale SA’s plan to turn around its copper and nickel-mining unit is taking longer than expected, risking a delay to a possible sale or spinoff of a group the miner says could be worth $40 billion.

The world’s second-largest iron producer slashed its annual goal for copper output by 19% as it grapples with extended maintenance and additional stoppages at some mills. In the first six months of the year, Vale’s nickel and copper production fell 10% and 25%, respectively.

Related: Vale cuts full-year production forecast, buoying iron ore market

Vale has been looking for alternatives to unlock value at its base-metals unit, which accounted for almost 15% of the Rio de Janeiro-based firm’s revenue in 2021. The company is yet to decide on whether it would spin off the division responsible for copper and nickel assets, or possibly merge that business with the assets of another company.

After facing several operational setbacks in 2021 — including a fire at a Brazil’s Salobo copper mine and workers trapped in a Canadian mine –- the company signaled it would need another year of improving mine performance before deciding what to do with the division.

The process of stabilizing Vale’s base-metals operations “remains rocky,” Banco Bradesco BBI analyst Thiago Lofiego said. “We do note that production guidance implies a relevant recovery in production” in the second half of the year, he said. Analysts at Banco BTG Pactual SA analysts said investors may get less confident on the company’s execution.

(By Vinícius Andrade and Mariana Durao)