VNC to cease nickel, cobalt production at start of 2021

Vale New Caledonia (VNC) will cease operations at the onset of 2021, parent company Vale’s chief financial officer Luciano Siani Pires said on Thursday October 8.

The news comes exactly one month after the asset’s proposed sale to Australian zinc miner New Century Resources fell through.
Vale announced its failure to successfully negotiate the sale of a 95% stake in VNC to the Australian miner on September 8 and has been unable to secure a suitable buyer in the month since negotiations collapsed, Fastmarkets understands.
But the news of VNC’s Goro mine closure has taken some quarters of the nickel market by surprise, with the asset seemingly poised to service growing class-1 nickel demand from the burgeoning electric vehicle (EV) sector.
Global nickel consumption for preferential battery-grade nickel sulfate in battery precursor production increased by 28% year on year in 2019 to 162,000 tonnes, from 126,562 tonnes in 2018.
Brazilian multi-metal miner New Caledonia’s operations were preparing to realign their nickel and cobalt production to service the EV sector’s growing demand for class 1 nickel units as part of New Century’s takeover.
VNC had already entered into a confidential offtake agreement to supply high-profile EV maker Tesla’s Nevada-based Giga factory with nickel and cobalt mined from its Goro asset back in March, before negotiations officially began.
Fastmarkets understands that potential buyer New Century had planned to produce the battery precursor material nickel mixed-hydroxy precipitate (MHP) on the prevision that their planned acquisition was successful, commensurate with the offtake agreement already in place with Tesla.
But talks between the two companies deteriorated beyond repair at the beginning of September, with the extension of the initial exclusivity period for the sale - agreed to by both parties in May - seemingly to no avail.
Vale placed VNC on care and maintenance after negotiations broke down, but operations there will cease entirely in 2021, with the former failing to divest the asset it has been trying to sell since December 2019.
Despite a bright outlook for nickel and cobalt demand from the EV battery sector, the closure of the embattled asset seems attributable to Vale’s difficulty finding a buyer who could suitably develop the asset, which has failed to reach its full production to date.
Goro produced just 23,400 tonnes of nickel in 2019, a 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.
Now a potential 60,000 tonnes per year of refined nickel will be taken offline entirely once Goro ceases operations, despite this being at a time when other producers are ramping up nickel sulfate output in anticipation of increased EV sector uptake.

Amy Hinton

amy.hinton@fastmarkets.com

Published

Amy Hinton

October 08, 2020

15:45 GMT

London