Vale is evaluating bids for stakes in the base metals business

Vale has received multiple offers for a stake in its base metals business after talks with parties from carmakers to sovereign wealth funds, its chief executive said, as he predicted the division could become “even bigger” than the Brazilian mining group itself.

Eduardo Bartolomeo said “non-binding offers” had been made for up to 10 percent of the unit, which produces materials key to the energy transition and is being spun off as a stand-alone entity separate from Vale’s main iron ore operations.

He told the Financial Times that a partner could be a car manufacturer, an industrial group, a government investor or a pension fund. “That’s who I’m talking to,” he said. “All.”

Vale is also in discussions to bring the automaker onto its board, Bartolomeo added, without giving further details.

Iron ore accounts for 80 percent of Vale’s revenue, whose market capitalization of $79 billion makes it the largest publicly listed company in Latin America.

But Bartolomeo said the base metals business – which includes nickel mines in Canada and Indonesia, copper mines in Brazil and stakes in cobalt and platinum group metals – could one day outgrow its parent company and go public.

Aerial view of the iron ore terminal on Guaiba Island, owned by Vale
Iron ore terminal on Guaiba Island, owned by Vale. Iron ore provides 80 percent of the company’s revenue © Mauro Pimentel/AFP via Getty Images

“We basically want to hedge this business,” Bartolomeo said. “This thing can become even bigger than Vale. Not tomorrow, not even next year – when you look at the long term.”

RBC analysts valued Vale’s base metals unit at $22.3 billion in a recent survey. However, the gloomy global economic outlook, which has weighed on copper prices, could make this difficult.

Share prices of major mining companies have mostly risen over the past year as demand for energy transition metals has increased. Vale’s São Paulo-traded shares rose 17 percent.

After a dam disaster in its homeland in 2019 that killed 270 people, and as China’s once-insatiable demand for iron ore begins to cool, the Brazilian miner is increasingly focused on repositioning toward metals with higher growth potential.

“This is a supercycle,” Bartolomeo said, referring to the metals needed to electrify transportation and power. “What you’re looking at in nickel is a supercycle.”

Although Vale had previously signaled it could have an investment partner by early December, the timing has been pushed back and the deal is expected during the first half of this year.

The spin-off of the base metals business will continue even if a suitable partner is not found, Bartolomeo said.

The new investor will not be a mining company, ruling out rivals such as BHP or Rio Tinto who are also trying to diversify away from iron ore, the main ingredient in steel.

The offtake agreement, under which Vale supplies metals on a long-term basis, could be part of a new investment arrangement, he added. Vale already has contracts to supply nickel for batteries to Ford and Tesla.

Bartolomeo insisted that Vale was not concerned with regaining its crown as the world’s largest iron ore producer, but was instead focused on expanding value-added forms of the mineral, such as hot briquetted iron.

“We want to be a niche player in the high-end,” said Bartolomeo. “Being the biggest is not a problem for us.”

With Beijing lifting its Covid-19 restrictions, Bartolomeo added that he was “cautiously optimistic” about China, which accounts for about half of the world’s steel production.

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