Brazil Miner Vale Grows Weary of Nickel
July 27 2017 - 1:58PM
Dow Jones News
By Paul Kiernan
RIO DE JANEIRO -- Brazilian mining giant Vale SA, the world's
largest producer of nickel, signaled Thursday that it will stop
betting on a recovery in prices for the metal after such hopes
failed to materialize in recent years.
Chief Executive Fabio Schvartsman, who took the helm of the
company in May, said Vale's nickel investments in recent years
haven't paid off because they were based on unrealistic price
expectations.
"Every one of Vale's nickel production facilities will have to
work on the assumption that current prices will remain for a long
period of time, " Mr. Schvartsman said in a conference call with
analysts. "In other words, Vale will stop making investments
thinking that the price of nickel in the future will be much higher
than at present."
Vale has long anticipated an upturn in the nickel market, which
peaked in 2007 and never recovered. In late 2014, when prices were
around $16,000 per metric ton, Mr. Schvartsman's predecessor,
Murilo Ferreira, told investors that prices would likely rise
"substantially" higher than Vale's $21,000 forecast for the coming
year. Instead, prices went the other way, and nickel is currently
trading at less than $10,000 a ton.
The change in strategy could result in an eventual shutdown of
Vale's money-losing nickel operation in the French territory of New
Caledonia. Until Mr. Schvartsman took over, the company had been
implementing a four-year project to ramp up production on the South
Pacific island from 34,300 metric tons of nickel -- about 11% of
Vale's capacity -- to 57,000 metric tons.
But the operation has been troubled in recent years by
regulatory issues, such as stricter environmental laws, and
operational problems, such as an acid leak in 2016. In its annual
report, Vale said its reserves in New Caledonia wouldn't be
economically viable at the average nickel price over the past three
years. It took a $284 million impairment charge on the operation in
2016.
"If the other alternatives are exhausted and we don't find any
way to permit a sustainable operation, I think our obligation is to
face the question of shutting down," Mr. Schvartsman said.
Write to Paul Kiernan at paul.kiernan@wsj.com
(END) Dow Jones Newswires
July 27, 2017 13:43 ET (17:43 GMT)
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