Vale S.A
VALE
at its investor day stated its plans to separate its base metal business into a new legal structure, Vale Base Metals. The miner is currently in talks to sell a 10% stake in the unit. It plans to retain the remaining 90% stake to have control over the business and to capitalize on the solid demand for copper and nickel due to the energy transition trends. This move is expected in the first half of next year.
The Vale Base Metals business, which includes exploration efforts related to nickel, copper, cobalt, PGMs as well as gold and silver generated around 15% of the company’s revenues in 2021. The company will have an estimated asset base of $20 billion and manage VCL (nickel assets in Canada), Indonesian Joint Ventures, Onça Puma (nickel mine in Brazil) and Salobo Copper Project in Brazil.
The demand for copper and nickel is expected to remain strong in the years to come due to the shift to electric vehicles and decarbonization efforts across the globe. Miners like
BHP Group
BHP
and
Rio Tinto
RIO
are thus focusing on investing in boosting their capacity to produce these metals.
Vale expects nickel demand to rise to 6.2 million tons by 2030, exhibiting a 55% rise from 4 million in 2021. Copper demand is expected to be around 37.4 million tons in 2030, up 25% from 29.9 million tons in 2021. The company estimates that around 19% per year growth in copper demand will be from the electric vehicle segment and 10% per year growth will be from renewables.
VALE expects its nickel production in 2022 to range between 175kt and 190 kt. While nickel production is expected to dip to a range of 160kt-175 kt in 2023 due to a planned overhaul, it is expected to pick up and reach the range of 230kt to 245 kt in 2026. Beyond 2030, the company expects to produce more than 300 kt of nickel.
Vale has entered into a multi-year agreement to supply low-carbon nickel products to Swedish lithium-cell producer Northvolt AB. The company recently announced that it has entered into a long-term agreement to supply battery-grade nickel sulfate from its proposed plant at Bécancour, Québec, Canada to
General Motors
GM
. This will be used in General Motors’ Ultium battery cathodes.
Vale’s guidance for copper production is at 270-285 kt for the current year. Production for 2023 is expected to range between 335kt and370 kt and in 2026 to be between 390kt and 420 kt. For 2030 and beyond, copper production is expected to peak at 900kt.
Meanwhile, Vale expects its Iron Solutions business will be supported by steel demand stemming from emerging nations and global population,economic growth, urbanization and energy transition trends.
The company expects iron ore production at around 310 million tons in 2022. For 2023, iron ore production is expected at 310-320 Mt. The company expects production to increase to 340-360 Mt in 2023. Iron ore production levels are expected to reach above 360 Mt in 2030.
Price Performance
Image Source: Zacks Investment Research
In the past year, shares of Vale have gained 21.7% against the
industry
’s growth of 19.6%.
Zacks Rank
Vale currently carries a Zacks Rank #3 (Hold). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
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