Vale SA plans to spend as much as $3.3 billion on improvements at its mining operations in Brazil and Canada to boost copper and nickel production capacity over the next four years.
The Brazilian mining giant sees the potential to expand production capacity to about 500,000 tons of copper by 2028 mainly through improvements to its Salobo and Sossego mines in Brazil, Vale said in its latest estimates for its base metals unit. Vale produced 321,000 tons of the wiring metal last year. Nickel also gets a capacity lift.
Mark Cutifani, the former Anglo American Plc boss who leads the Vale Base Metals board, on Thursday presented a plan that includes billions of dollars in capital expenditure initiatives to increase productivity and reduce costs in nickel and copper mines and processing plants.
Copper surged to a record last month, driven by a wave of speculative money as bullish investors bet on looming shortages. While prices have since retreated, there is a broad consensus that the copper market is likely to face deficits in the next few years, and the world’s biggest mining companies are all seeking to increase their production in anticipation of future price gains.
Vale broke out its base metals operations as a separate unit last year and sold a 10% stake to Saudi Arabia. The Rio de Janeiro-based metals producer has been assessing liquidity options for the business that may include a public offering.
Vale expects to have “early wins” with initiatives such as reducing idle capacity at its Sudbury mine mill in Canada using its own sourced metals. The company estimates a 5% boost to copper output and a 10% gain for nickel by 2026 compared to December estimates after $800 million in initial spending.
“The presentation was impressive … but many of the near-term concepts we have heard in previous presentations over the years,” Citigroup analysts wrote in a note to clients, calling the base metals business ‘a ‘show me’ story for equity investors.”
(By Mariana Durao)
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