Vale grants New Century Resources exclusivity in VNC deal

Vale Canada has entered into a 60-day exclusivity period with Australian specialist zinc miner New Century Resources to negotiate the sale of a 95% stake in Vale New Caledonia (VNC), Fastmarkets understands.

Subject to successful due diligence and negotiation, New Century will take majority ownership of VNC while Société de participation minière du Sud calédonien will retain the remaining 5% stake, which coordinates mining activity across the region’s three provinces.

Vale first announced its intention to exit operations in New Caledonia on December 2, 2019, revising its 2020 nickel production guidance to 200,000-210-000 tonnes per year from 240,000 tpy previously to account for the anticipated loss of VNC’s 60,000-tpy output.

Indeed, the embattled South Pacific asset has proved a financial burden for Vale since starting operations in 2010, with the company absorbing $250 million debt in 2019 incurred as a result of New Caledonia running VNC.

Vale also reported $46 million in negative earnings in the first quarter of 2020 before interest, taxes, depreciation and amortization (Ebitda), compared with negative $64 million a year before.

New Century will not shoulder any debt in the potential acquisition, however, stipulating that the French government is expected to continue assisting its overseas territory with the financial aid required to run VNC, while also being backed by Australian bank Macquarie in the buyout, the company said.

Output doubt
Should the acquisition be successful, the company plans to become a major supplier of nickel and cobalt to the electric vehicle industry, prospective buyer New Century said.

Fastmarkets’ research current estimates electric vehicle (EV) demand for nickel at 3-5% of the market share, but this share is expected to rise to double-digit market penetration from 2025 while pressure to reduce carbon emissions drives the global consumption of EVs.

New Century’s acquisition of VNC would make it well placed to service the electric vehicle market with Goro’s 60,000 tpy of nickel and 4,300-5,000 tpy of cobalt production capacity.

A series of issues in recent years hampered output from the mine, however, including blockades from residents who oppose the development of the asset, which left its output and its profitability in question.

While Goro has the capacity to produce 60,000 tpy of nickel in the form of nickel oxide, the site produced just 23,400 tonnes of nickel in 2019, little over a third of its yearly production capacity.

Attempts to implement high pressure acid leaching (HPAL) operations at the site have also been unsuccessful, leaving VNC unable to produce preferential battery material nickel sulfate, sources said.

New Century expressed the intention to transition nickel output at Goro to a mixed hydroxide precipitate (MHP), an intermediate laterite ore product which can be used in batteries.

Fastmarkets assessed the nickel sulfate min 21%, max 22.5%; cobalt 10ppm max, exw China at 22,500-23,000 yuan ($3,152-3,222) on May 22, unchanged from the week before.

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