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Vale sees nickel opportunity in electric vehicle growth

New York — Adoption of electric cars in developed countries could result in a strong future for Brazilian mining group Vale's large nickel mining and smelting operations in Canada and New Caledonia in the South Pacific, CEO Murilo Ferreira said on Tuesday.

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Speaking at a press briefing at the New York Stock Exchange, Ferreira made a bold prediction that half of the cars in the Group of Seven industrialized democracies -- the US, Canada, France, Germany, Italy and the UK -- would be electric vehicles within five years.

"The electric car segment growth will be accompanied by appropriate remuneration in Vale's [nickel operations]," Ferreira said.

He said Vale's nickel assets would be well-placed to supply the battery makers building batteries for electric vehicles, which required nickel purity of 99.9%, with the Canadian assets supplying North America and New Caledonia supplying Asia.



Ferreira said nickel production in other parts of the world, including Indonesia, was not capable of producing the purity required for batteries for electric vehicles.

Most of the battery makers supplying batteries to the electric vehicle manufacturers are located in Japan and China.

Vale acquired the nickel assets of Inco for almost $16 billion in October 2006, around six months before nickel prices reached all-time highs of above $52,000/mt on the London Metal Exchange. The nickel market then quickly collapsed because of demand destruction as appliance manufacturers rushed to design out nickel-bearing stainless steel grades from their products.

Ferreira said that in the first year, Vale's newly acquired nickel operations produced EBITDA of around $8 billion. Despite a disappointing price performance since, and a bitter, year-long strike at its mining and smelting operations in Canada in 2009/2010, he said the acquisition had been positive for Vale overall.

He also said Vale had no intention of divesting its nickel assets as part of its current round of asset divestments aimed at reducing debt levels to a target of between $16 billion and $17 billion.

But Ferreira made no mention of stainless steel, which remains by far the largest consumer of nickel globally, or the recent renaissance of nickel-bearing stainless steel grades, driven by a prolonged period of surpluses, low nickel prices and physical premiums.

--Anthony Poole, anthony.poole@spglobal.com

--Edited by Richard Rubin, richard.rubin@spglobal.com