Vale's Voisey's Bay streaming deals with Cobalt 27, Wheaton advance mine expansion plans

Vale has signed separate agreements with Wheaton Precious Metals Corp and Cobalt 27 Capital Corp to sell an aggregate total of 75% of the cobalt produced at Voisey’s Bay, enabling it to proceed with an expansion of the mine.

From January 1, 2021, Wheaton and Cobalt 27 will be entitled to receive finished cobalt equivalent to 42.4% and 32.6% respectively of the future cobalt production from its Voisey’s Bay mine in Labrador, Canada, the company said in a press release on Monday June 11.

In return, Vale will receive an initial cash payment of $690 million upfront, comprising $390 million from Wheaton and $300 million from Cobalt 27.

The upfront payment is equivalent to 40% of the estimated nominal capex of $1.7 billion for the underground mine expansion project at Voisey’s Bay.

“By unlocking the value of the cobalt by-product at Voisey’s Bay through this streaming deal, Vale has found a way to resume substantive work on the underground project in Voisey’s Bay and support the market’s increasing demand for nickel, copper and cobalt,” Eduardo Bartolomeo, Vale’s executive officer for base metals, said.

Although a feasibility study was completed in early 2015 to expand Voisey’s Bay operations underground, the project was put on hold due to difficult market conditions in recent years.

During the initial ramp-up period of four years from 2021, Voisey's Bay Mine expansion project should produce an average of around 1,800 tonner per year of refined cobalt, at average grades of 0.15% cobalt, according to Vale’s press release.

When operating at full scale, from 2025 to 2033, the underground mine should produce an average of 2,600 tpy of refined cobalt at an average grade of 0.13% cobalt.

Under the terms of the agreements, Cobalt 27 and Wheaton will also make additional payments of 18% of the cobalt Metal Bulletin price for each pound of finished cobalt until the upfront payment has been fully depleted, after which the additional payments will increase to 22% of the cobalt reference market price.

"Following our recent investment in Ramu, This transaction builds on our commitment to add high quality streams and royalties and represents a strong step forward in diversifying our portfolio with the Voisey's Bay mine, a world-class, low-cost and long-life nickel, copper and cobalt asset located in a low political-risk jurisdiction,” Anthony Milewski, chairman and chief executive officer of Cobalt 27, said in a separate announcement.

“We believe the enhanced exposure to cobalt, will yield significant returns to our investors as electric vehicles (EVs) begin to change our society in the coming years,” he added.

In May, Cobalt 27’s Electric Metals Streaming subsidiary signed a streaming agreement with Ramu Nickel (RNL) for cobalt and nickel produced at the Ramu mine in Papua-New Guinea.

Cobalt prices have risen consistently and robustly over the past two years against a backdrop of upbeat forecasts for EV production and sales. 

Metal Bulletin assessed the price of low-grade cobalt at $41.65-42.95 per lb on June 8, almost quadruple $10.5-11.1 per lb two years ago.

Voisey’s Bay mine has been in production since 2005. Over that time it has produced more than 600,000 tonnes of nickel, 400,000 tonnes of copper concentrate and 12,000 tonnes of cobalt.

Susan Zou

susan.zou@metalbulletinasia.com

Published

Susan Zou

June 12, 2018

10:49 GMT

Shanghai