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Vale returns to profit, eyes 'dramatic opportunity' for nickel

Brazil-based miner Vale declared a dividend as it reported a December quarter profit despite the impact of the global settlement for the Brumadinho tailings dam disaster.
Vale returns to profit, eyes 'dramatic opportunity' for nickel Vale returns to profit, eyes 'dramatic opportunity' for nickel Vale returns to profit, eyes 'dramatic opportunity' for nickel Vale returns to profit, eyes 'dramatic opportunity' for nickel Vale returns to profit, eyes 'dramatic opportunity' for nickel

Vale’s Sudbury nickel operations in Canada

Staff reporter

The company's net income was US$739 million, up from a $1.56 billion loss a year earlier.

Adjusted EDITDA rose 20% to $4.2 billion, after $4.8 billion in expenses of which $3.9 billion was related to the R37.7 billion (US$7 billion) Brumadinho settlement reached in January.

Vale's ferrous minerals division achieved its second largest adjusted EBITDA of $8.8 billion, thanks to a 17% rise in realised prices and 26% higher sales volumes compared with the third quarter.

It put its iron ore fines and pellets C1 cash cost ex-third party purchases up slightly, quarter-on-quarter, at $12.70/t, while the cash cost (ex-ROM, ex-royalties) FOB was $15.30/t.

The fourth quarter had marked the partial resumption of all iron ore fines operations halted in 2019 following the Brumadinho disaster which killed 270 people, with Vale saying the partial resumption was a significant milestone on its path to achieving 400Mtpa capacity by the end of 2022.

It said it was "well positioned" to be adherent to the new Global Industry Standard on Tailings Management" by the end of this year.

"We are working to have all 32 structures currently at Emergency Level in safe conditions by 2025," Vale said.

Higher commodity prices also boosted base metals EBITDA to $1.1 billion, although its Vale New Caledonia operations have been halted since December 10 due to violent protests by independence activist groups near the site.

The miner said it continued to seek an open dialogue "with all the parties" regarding the sale of its stake in VNC but if this did not succeed it would initiate the process "to cocoon the asset into care and maintenance".

‘Dramatic opportunity' for nickel

Executive officer base metals Mark Travers told analysts in a conference call there was "great evidence" the electric vehicle market was here and going to grow dramatically over the coming years.

"And it's going to be a dramatic opportunity for the nickel business," he said.

"While there are discussions in [and] around the form of batteries, lithium ion for sure is going to take a significant portion of that market.

"There are places for things like the lithium phosphate, iron phosphate battery, but we believe that nickel will take a preeminent position in the battery space, and it will be demanded by the industry."

He said Vale saw a "significant opportunity" in providing nickel which met strong ESG standards.

"We are seeing a lot of discussion, we're hearing a lot of discussion around the type of nickel that's being provided in terms of ESG standards, whether it's low carbon, or coming from well-regulated, well-run jurisdictions," he said.

"And so clearly we can position and we do position our nickel in the top of that spectrum."

The company also had a positive long-term outlook for copper, driven by green economy investments, and it said future supply growth was challenged given the decline in ore grades and lack of major discoveries.

However CEO Eduardo Bartolomeo told analysts it was "not the time" to consider separating the base metals business.

He said Vale also wanted to "grow the copper", however the company trimmed 2021 copper guidance to 360,000-380,000t.

It said base metals had gone through a broad safety review of operational process, resulting in a comprehensive overhaul of maintenance standards, procedures, training and oversight.

"These additional measures will impact mining equipment availability, with the largest backlog impact on the Salobo operation, likely to cut our initial production estimate of finished copper by 10,000t, with a recovery plan during the catchup period during 1Q21 to further mitigate this impact," Vale said.

It announced shareholder renumeration of R4.26 per share for the second half of 2020, of which about R3.43 was dividends and the remainder interest on equity.

Vale shares are near a one-year high, last trading at R98.57 to capitalise it about R505 billion (US$90 billion).

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