By Paul Kiernan
RIO DE JANEIRO--Brazilian mining company Vale SA expects cash
generation from its base-metals division to roughly quadruple
through next year as new copper and nickel operations ramp up and
an Indonesian export ban drives prices higher, a company executive
said Thursday.
Vale's base-metals division reported earnings before interest,
taxes, depreciation and amortization, or Ebitda, of $1.64 billion
in 2013, a 172% rise from the previous year. The division mainly
comprises nickel, of which Vale is the world's No. 2 producer, and
copper.
After spending some $6.72 billion on its base-metals business
during the last two years--a figure that includes projects and
sustaining capital expenditures--Vale is starting to see results.
Nickel output rose 9.9% last year to 260,000 metric tons and copper
production surged 27% to a record 370,000 tons.
Indonesia's government in January effectively banned exports of
nickel ore. Since the country's ore accounts for more than 20% of
world production of the metal, Vale expects a "significant" impact
on the market.
Peter Poppinga, the company's executive director for base
metals, said project ramp-ups at its Salobo copper mines in Brazil,
its nickel operations in New Caledonia and Canada, and its Onca
Puma nickel mine in Brazil should generate an additional $3 billion
in Ebitda in 2015, compared with last year. A projected rise in
nickel prices to $20,000 per ton from last year's average $14,900
should create another $1.5 billion in Ebitda for Vale, he said.
"[That] leads us to our $6 billion, which is very conservative
because we think prices can be much higher than that because of the
export ban in Indonesia," Mr. Poppinga said in a conference call.
"If you go to 2014, the reality will be in between what we have
today and what I just said, so it's something around $4 billion to
$4.5 billion."
Write to Paul Kiernan at paul.kiernan@wsj.com
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