Vale, New Century fail to reach agreement in Vale NC sale

Vale Canada - subsidiary of Brazilian multi-metal miner Vale - and Australian zinc producer New Century Resources have failed to reach an agreement in the latter’s 95% acquisition of Vale New Caledonia (VNC), the former announced on Tuesday September 8.

The announcement brings the exclusivity period under which the prospective sale was being negotiated between the two entities to an end after negotiations began on May 25 and were subsequently extended on July 28.
As no sale has been negotiated, Vale will now take steps to place its New Caledonia asset under care and maintenance with a view to closing operations should a suitable buyer not be found in the proceeding months.
Fastmarkets understands, however, that the French State, the South Province of New Caledonia and the management of VNC will continue their efforts to ensure an outcome that protects future operations at the asset’s Goro nickel mine in New Caledonia.
But Vale’s exit from VNC seems assured.
“All parties to this negotiation have invested significant effort in an attempt to reach a solution for the sustainable future of VNC,” Vale's chief executive officer Eduardo Bartolomeo said on the same day. “Vale and everyone involved in the divestment process…continue to explore alternatives to create a viable futures for VNC, all of which contemplate Vale’s exit.”
Vale first expressed its intention to exit operations in New Caledonia in December 2019. The miner revised its 2020 nickel production guidance to 200,000-210,000 tonnes per year from 240,000 tpy to take into account the anticipated loss of VNC’s 60,000-tpy output.
Goro produced just 23,400 tonnes of nickel in 2019, little over a third of its yearly capacity, and has struggled to reach its full capacity due to a series of issues in recent years, including blockades from residents who oppose its development, Fastmarkets understands
The impact of the latest announcement pertaining to the embattled asset remains unclear, however, with no definitive announcement from Vale regarding production amid the sale's collapse.
Fastmarkets understands that, subject to a positive outcome arising from the exclusivity process, New Century had been planning to process the battery precursor material mixed hydroxide precipitate at Goro.
Indeed, progress had already been made in fitting the mine to service the battery supply chain, with VNC signing a confidential contract to supply EV producer Tesla with nickel and cobalt from Goro in March.
The offtake agreement stipulates that Goro will supply nickel in the form of battery precursor mixed hydroxide precipitate to be processed at Tesla’s gigafactory in Nevada, United States.
It is unclear as to whether New Century were party to negotiations on entering the exclusivity period while the status of the contract is unclear should VNC close its doors permanently, trading sources said.
Fastmarkets understands that a previous offer to purchase the 95% stake in VNC from Korean steel-maker Posco was rejected by Vale and its financial backers in May, following a lengthy consultation process while no other prospective offers for VNC are presently on the table.

Amy Hinton

amy.hinton@fastmarkets.com

Published

Amy Hinton

September 08, 2020

10:44 GMT

London