Leaving The Vale Of Tears

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What's going on?

Brazilian mining giant Vale announced plans on Wednesday to break out its base metals business.

What does this mean?

Vale makes the lions share of its money from iron ore mines in Brazil, but it’s also got a growing copper and nickel business. And as the world ditches fossil fuels, EV batteries are making demand for those base metals skyrocket so youd think the company would be at the top of investors Christmas list right now. But the world isn’t biting: see, the iron ore business isn’t particularly hot, and Vale’s deadly disasters haven’t won the firm any admirers. That might be why its stock is trading at a price-to-earnings ratio about half the average figure in the space. But now Vale is taking the bull by the horns, announcing plans to separate out its base metals business next year and bring EV experts on board, in a bid to attract more investment to the segment.

Why should I care?

Zooming in: Ambition aplenty.
Vale isn’t ruling out an IPO in the future, but for now it thinks this move could give it access to around $20 billion in base metal investments. Plus, its selling 10% of the new entity to a “strategic partner” next year, which should bring in another nice chunk of cash. And Vale might need it: its aiming to triple its copper production by 2030 and boost nickel by around 50% as part of its plan to become a major supplier in the EV market.

The bigger picture: Get hustling.
It looks like the mining industry has a tough time ahead. Even if it gets the investment it needs, it’ll still have to hustle to meet demand. After all, the International Energy Agency is saying we need 50 new lithium projects, 60 nickel projects, and 17 cobalt projects by 2030 a tall order for an industry that usually takes 15 years to get a project up and running.

Originally posted as part of the Finimize daily email.

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