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A fire in Canada, disruptions in Indonesia and shutdowns in Brazil and
New Caledonia: it was tough getting nickel out of the ground last
quarter for Vale SA.
Output of the metal at Vale, the world’s largest producer, missed
estimates for a second consecutive quarter. The lower-than-expected
production comes as a plunge in metal prices makes the Rio de
Janeiro-based company’s plan to sell as much as 30 percent of the unit
in an initial public offering less likely.
Vale said in its second-quarter output report Thursday that nickel
production rose less than 9 percent to 67,100 metric tons, missing a
73,900-ton average forecast by seven analysts surveyed by Bloomberg. The
result, called “poor” by BMO Capital Markets in a research note, puts
production for the first half at 136,000 tons, or less than 45 percent
of the company’s annual target of 303,000 tons.
Operations in the quarter were affected by a fire at its operations in
Sudbury, Ontario, which reduced nickel and copper production by 5,000
tons each, furnace maintenance in Indonesia and a “brief shutdown” for
plant improvement at the Onca Puma project in Brazil, Vale said. The
miner is planning to close facilities at Sudbury and Thompson in August
for maintenance, it said.
“Sudbury operations continue running below potential as a result of
non-recurring operational issues,” Banco BTG Pactual SA analysts
Leonardo Correa and Caio Ribeiro said in a research note. “A base-metals
IPO looks challenged under this pricing scenario.”
Vale’s press office declined to comment on the company’s nickel
operations.
IPO Prospects
In December, Vale told investors in New York that it was considering
selling a minority stake in its base-metals operations, the largest
generator of revenue after iron ore. The miner was forecasting increased
profit and output at the unit after years of setbacks including strikes
in Canada, furnace design defects at Brazil plants and an acid spill in
New Caledonia.
At the time, Vale projected base metals earnings before interest, taxes,
depreciation and amortization, or Ebitda, of $4 billion to $6 billion
this year from $2.5 billion in 2014. Ebitda is now forecast at $3.1
billion to $4.6 billion based on a $14,500 to $21,000 a ton nickel price
scenario and a $5,800 to $6,800 copper price outlook.
Nickel for delivery in three months declined 0.3 percent to settle at
$11,430 a ton on the London Metal Exchange on Thursday, expanding its
losses in the past 12 months to 40 percent. Copper for delivery in three
months declined 1.7 percent to $5,272.50 a ton in London.
Vale will only go ahead with the IPO if nickel and copper prices reach
“appropriate” levels, Investor Relations Director Rogerio Nogueira said
June 24, echoing similar comments from company executives since
December.
Source: Bloomberg |
