In news that is sure to have a bearing on Chalice Mining’s plans to sell a stake in its huge Julimar metals project in WA, Brazilian mining major Vale has been knocked down in the rush of buyers for a stake in its base metals business.
Vale, which is the world’s second biggest iron ore exporter after Rio Tinto, has a large base metals business based on the old Inco nickel and copper operations in Canada, as well as nickel mines and prospects in New Caledonia and Indonesia as well as Brazil.
The miner said this week it has received offers for a minority stake in its base metals unit, as it seeks a strategic partner to help it catch the growing demand for metals in the electric vehicle market.
Vale has been seeking to unlock value from the unit, given expected demand for nickel and copper for the production of batteries for electric vehicles and other materials related to the energy transition towards more electrification.
Up until mid-2021, the base metals unit had been poorly run – with industrial relations problems in Canada hitting output and consistent shortfalls in reaching output targets for nickel and copper especially.
But Vale management woke up to the potential in 2022 (no doubt after looking at leads from the likes of BHP and its huge copper and growing nickel businesses).
Vale said the proposals are non-binding, but did not detail who it is having talks with or where the companies come from.
Bids have reportedly come from carmakers, pension funds and sovereign wealth investors.
The new business will be based in London, according to media reports in Brazil, well away from what has been at times, a toxic business culture in that country from overweening government intervention from the left and right.
In early December, Vale executives confirmed to its New York investor day function that the company was working to lure a partner that would buy a stake of up to 10% in its base metals business in the half of 2023.
CEO Eduardo Bartolomeo told the Financial Times this week that “This thing (Vale Base Metals) can get even bigger than Vale. Not tomorrow, not even next year — when you look long-term.”
Analysts reckon the base metals unit could have a value of $US25 billion, meaning a 10% stake could be valued at around $US2.5 billion, and more if there is an active bidding war.
But in Australia, the obvious high level of interest increases the chances of Chalice selling a stake in its Julimar project.
Chalice revealed late last year that it had started talking to possible interest groups.
Chair Derek La Ferla told the AGM in November:
“As we begin to establish this roadmap for development, it has been pleasing to see a significantly increased level of inbound inquiry from potential strategic partners, off-take partners, financiers and investors, both in the project and at the corporate level.
“The level of strategic interest has particularly increased since the passing of the US Inflation Reduction Act (IRA), the escalation of the Russia- Ukraine conflict and the continued disruption being experienced in global supply chains.
“We announced recently that Chalice is considering securing a strategic minority joint venture partner (or indeed multiple partners) to assist in developing a potential mine at Gonneville and, while there can be no certainty of an outcome in this regard, securing a strategic partnership is one of our key objectives for 2023.”
Of interest is whether BHP is one of those possible investors. It would seem to have ruled itself out of contention with the takeover of OZ Minerals but Julimar has a lot of nickel – which is one of BHP’s future Tier 1 investments, along with cobalt, gold and copper (which BHP has at Olympic Dam, Escondida and in OZ Minerals).
BHP doesn’t have any PGE3 (palladium, and platinum, with small levels of gold) and Chalice does at Julimar/Gonneville (the first major prospect outlined).
Chalice has yet to give any idea of how and what type of investment it is looking at – some analysts speculate that a mining arm will be spun off to exploit Gonneville to start with, while Chalice will retain the exploration rights to other prospects along the 30-kilometre line of strike at Julimar and own a bit stake in the mining and processing business.
