Mining boss Ellison tells investors: ‘I hate what I’ve done’
The executive has been pressured to explain why the company made historical payments to offshore entities he controlled.
Brazilian mining giant Vale (NYSE:VALE) said on Wednesday it would hike nickel production by about 70% in coming years to 360,000 tonnes a year, mainly by expanding in Indonesia.
The company plans to exit its troubled New Caledonia assets but still aims to ramp up nickel output ahead of rising demand for electric batteries, executives said.
Vale has decided to walk away from its ailing Goro nickel operation on the Pacific Island of New Caledonia, which has been strewn with operational problems ever since it came on stream, two years behind schedule, in 2011.
The company, the world’s top nickel producer, had been hoping to attract a partner for the loss-making mine, but the lack of success prompted it to go it alone. Exactly a year ago, Vale announced it would invest $500 million in the project, mainly on a waste storage facility, between 2019 and 2022.
The company, however, has never fully mastered the challenging high-pressure-acid-lead (HPAL) technology used to convert ore to nickel oxides.
The original plan envisaged a three-year ramp-up to nameplate capacity of 58,000 tonnes of nickel in oxide and hydroxide. In 2018, its seventh year of operation, it produced 32,500 tonnes, down from 40,300 tonnes in 2017.
Vale said it would still build a $500 million waste storage facility
And this year, production of what Vale terms “finished nickel products from VNC source material” is expected to come in at 23,000 tonnes — less than 60% of the target.
“We have not been able to take Vale New Caledonia (Goro) to the [production] levels we wanted,” chief financial officer Luciano Siani acknowledged at the company’s annual investor meeting in London held on Wednesday.
An official and final announcement on Goro is expected to come early next year, though the most likely outcome will be a sale, New Zealand’s public broadcaster, RNZ, reported.
The plan for now is to shut the nickel refinery and stop cobalt production, which will result in a yet to be specified number of job losses, according to RNZ.
Vale said in November that it would write down its New Caledonia mine and incur a non-cash impairment charge of about $1.6 billion in the fourth quarter.
Nickel is the only base metal to have recorded gains this year, but prices for the key ingredient in stainless steel and electric vehicle batteries have begun to fall on concerns that an expanded trade war between the US and several countries including China, Brazil, Argentina and France, may dent demand.
Last week, the metal hit its lowest in more than four months and posted its steepest monthly loss (18%) in eight years on faltering steel output from top producer China and waning impact from an Indonesian ore export ban.
(With files from Reuters)
