Vale Base Metals Ltd. is tempering expectations of an imminent initial public offering, saying the market isn’t valuing it high enough yet, citing significant work ahead in cutting nickel costs.
Toronto-based VBM is 90 per cent owned by Brazil-based Vale SA VALE-N, which is known for its giant iron ore operations. VBM was carved out internally from its parent in 2023 ahead of an eventual IPO and it has a separate management team.
VBM holds Vale’s global portfolio of copper, nickel and cobalt operations, which are spread across Canada, Brazil, Japan, the United Kingdom and Indonesia. Last year, VBM grew its production in both copper and nickel, but it has struggled to make money over the past few years in Canada owing to oversupply in the Indonesian nickel market dragging the commodity price down.
“We are not in a rush,” said Marcelo Bacci, Vale SA’s chief financial officer, told reporters in Toronto on Tuesday about the IPO.
“On the operational side, we still have to prove our ability to deliver the growth. So, to be frank, we don’t think that the market will pay for the potential growth today.”
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Mr. Bacci said the timing of the transaction is hard to predict.
“If it’s going to be in six months, in one year, or two years, nobody knows,” he said. “But it’s important to be ready and it’s important to deliver.”
VBM is a relatively small player in copper compared to global competitors such as BHP Group Ltd. BHP-N, but it has ambitions to grow its annual production significantly to 700,000 tons by 2035. Last year, VBM produced 382,000 tons.
Teck Resources TECK-B-T considered buying VBM when the Canadian mining company was in play last year, The Globe reported. Vancouver-based Teck later agreed to be acquired by Britain’s Anglo-American PLC NGLOY.
Had Teck acquired VBM, that would have vaulted it into the top tier of producers of copper worldwide.
VBM has nickel interests in Indonesia, Brazil and in Canada through its Sudbury and Newfoundland and Labrador operations. The company bought its Canadian nickel assets from Inco Ltd. in 2006 for $19.4-billion.
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Vale last month wrote down the value of its Canadian nickel operations by about US$3.5-billion, owing in large part to pricing pressures stemming from ongoing Indonesian oversupply.
In its Canadian nickel business, the company is focusing on improving efficiencies and increasing productivity by tweaking mine designs, reducing downtime and lowering operating costs.
Vale is exploring a joint venture with rival nickel miner Glencore PLC GLNCY around the development of the latter’s Nickel Rim South Mine in Sudbury.
“You’ve seen what we’re trying to do, and what we are doing in Sudbury as a whole in the nickel business” to make it globally competitive, Shaun Usmar, VBM’s chief executive officer, told reporters.
“We’ve got work to do.”
Mr. Usmar, a South African, joined VBM in 2024. He was a long-time executive with Xstrata plc, which was acquired by Glencore in 2013. Subsequently he worked as Barrick Mining Corp.’s CFO and later was the founder and CEO of royalty company Triple Flag Precious Metals Corp, prior to joining VBM.
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For about a decade before he joined VBM, the company had a long history of missing its guidance, and despite progress under Mr. Usmar, VBM must consistently hit its targets before winning the full trust of investors, Jefferies analyst Christopher LaFemina said in a note to clients on Tuesday.
“After 10 plus years of operational underperformance, the value of VBM continues to be seriously underappreciated within Vale, as the market is still skeptical about the company’s organic growth and cost-cutting potential,” he said.
VBM is managing to steer clear of a problem facing some of its global mining peers – a shortage of sulphur used in refining from Middle East producers. The Iranian conflict is threatening to shut down some of the sulphur supply, which is essential for separating nickel and copper from ore.
Miners in Indonesia, which produce roughly 60 per cent of the world’s nickel, rely on the Middle East for roughly 75 per cent of their sulphur usage. These companies are expected to cut back on nickel production if disruptions persist in shipments through the Strait of Hormuz, as a result of U.S. and Israeli attacks on Iran.
VBM, however, uses sulphur produced in North America to process nickel from its mines in Sudbury and Labrador. Mr. Usmar said a potential shortage of the chemical would have no impact on its operations.
Editor’s note: A previous version of this article incorrectly stated that VBM considered buying Canada’s Teck Resources. In fact, Teck Resources considered buying VBM.