Copper takes priority for Vale amid energy transition push

Brazilian mining giant Vale has reiterated that it is focused on developing the potential of its base metals division amid the rise of interest in minerals linked to the energy transition, but has now underscored that copper is the main priority. 

In 2022, Vale, a global powerhouse in iron ore production, created Vale Base Metals (VBM) to concentrate the company’s operations in the copper and nickel segments.

Earlier this year, Vale completed the sale of 13% of VBM, which has nickel and copper operations, for US$3.4bn. Manara Minerals, a JV between Ma’aden and Saudi Arabia's Public Investment Fund (PIF) agreed to pay US$2.6bn for a 10% stake and US investment firm Engine No. 1 acquired the other 3%.

Now, Vale says that it is focused on developing its potential in base metals, but stated that its main interest is copper, along with the production of high-quality iron ore. 

"Our strategic efforts will focus on delivering a superior product portfolio with a stronger emphasis on the customer. In iron ore, we will accelerate our supply of high-quality products, while in base metals, we intend to continue growing, especially in copper," CEO Gustavo Pimenta said in Vale's 3Q24 earnings report.

Pimenta assumed the post of CEO recently.

Vale's message regarding its growing interest in copper is not surprising to some observers.

"Nickel production involves a more complex chemical and metallurgical process compared with iron ore or copper production. This explains why, looking at Vale's current figures, they’re investing more in nickel than in copper, as it's an operation that requires significant investment but may not yield high returns," a mining industry executive who worked at Vale told BNamericas on condition of anonymity.

“In the past, Vale attempted to drive nickel production but wasn’t very successful; perhaps the current management is beginning to understand these challenges better and may gradually prefer to focus more on copper and iron ore. Vale’s iron ore is high quality and highly appealing to steelmaking clients who need to reduce their greenhouse gas emissions.

"Additionally, the price of nickel today is heavily influenced by China, which is injecting substantial investments into nickel operations in Indonesia, putting significant pressure on prices and impacting nickel projects worldwide," the source added.

Results

Vale posted a net profit of US$2.4bn in the third quarter, down from US$2.8bn in the third quarter of 2023.

The net profit of the firm was impacted by a 10% drop in its net revenue in the quarter, due to the lower price of iron ore, and because of an additional provision for US$956mn assumed by the company in the period, linked to the compensation to be paid out for the 2015 collapse of the Mariana tailings dam operated by iron ore pellet maker Samarco, a JV between Vale and BHP.

The company posted net revenues of US$9.55bn, down from US$10.7bn in the year-ago period.

Of the total net revenues, US$7.97bn came from the company's iron ore operations and the rest from nickel and copper operations.

Tailings dam 

On Friday, the Brazilian government, local authorities, and Samarco, Vale and BHP, signed an agreement to end litigation regarding a compensation proposal for the disaster.

The tailings dam operated by Samarco collapsed and killed 19 people, causing the country’s biggest environmental tragedy, with around 50Mm³ of mining waste polluting rivers and reaching the Atlantic Ocean.

The companies involved will pay a total of 170bn reais (US$30bn) as part of a settlement, including a large portion of fresh funds.

Of the total, 38bn reais corresponds to amounts that have been disbursed for remediation and compensation measures, 100bn reais would be paid in installments over 20 years, and 32bn reais in obligations to be covered by Samarco, including initiatives for individual compensation, resettlement and environmental remediation.

"The obligations of the new agreement that remain for the companies include the removal of 9Mm³ of waste from the UHE Risoleta Neves reservoir, a hydroelectric plant located in the Rio Doce basin that occupies an area of more than 83,000km² in Minas Gerais and Espírito Santo states. The companies are also required to complete resettlement in the regions of Bento Rodrigues and Aracaju de Baixo, recover 54,000 hectares of native forest and 5,000 freshwater springs in the Rio Doce basin, as well as carrying out polluted area management (GAG)," the government said in a statement.

"Added to this is the implementation of the definitive indemnity program (PID), which is mainly aimed at those affected by the tragedy who were unable to document the damage suffered, who would be entitled to payments of 35,000 reais for those affected in general, and 95,000 reais for the affected fishermen and farmers. The estimate is that more than 300,000 people will be entitled to receive these amounts," it added.