BHP Eyes Nickel Sell-Down
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Nickel prices may have rebounded nicely this year, but not to many of the world’s big miners are long term holders - certainly BHP Billiton and its big Brazilian rival, Vale, are trying to reduce to exit their involvement in the metal, whose major source of demand is still for stainless steel.
Not even the semi-glamorous story of being nickel for new electric batteries has changed the mines of the boards and senior executives of the two giants - their involvement is either on the way out completely, if a buyer can be found in the case of BHP, or out of a high cost project that has never delivered for Vale.
In a foretaste of what BHP will find with its latest attempt to find a buyer or buyers for its NickelWest operations in Western Australia, its big Brazilian rival, Vale SA is having trouble selling a stake in its $US1.3 billion plus New Caledonia nickel mine after the initial bids for the asset came in at the lower end of expectations, according to Reuters.
In fact Reuters had originally reported that the sale had been postponed because of a lack of meaningful bids
The sale may be delayed for up to a year, the mining giant anticipates to see if the 2017 rebound in nickel prices continues, but the Reuters story was denied by vale which says it is still pushing to sell.
Nickel prices rose to more than $US11,000 a tonne in 2017 after hitting a 13 year low in February of this year.
The price has briefly topped $US12,000 a tonne in late 2017, but 2016’s near 40% rally as not been sustained. In fact nickel prices are up around 16% from January The LME price is currently around $US11,500 a tonne.
Reuters says Vale was seeking an investment of $US500 million to $US1 billion for a stake in the underperforming mine in New Caledonia, which has suffered technical setbacks, a chemical spill and violent protests from locals.
Vale New Caledonia comprises the Goro mine, a processing plant and port. Last year, it produced 34,000 tonnes of finished nickel and 29,300 tonnes in the nine months to the end of September.
Vale said in a US fling that it “clarifies that there is no decision to postpone the sale of a stake in its Vale New Caledonia (VNC) nickel mine and that the process to find a new partner is ongoing,” it said in a statement. “The search of a partner in VNC reinforces Vale's strategy to deliver value from all its assets and its commitment to preserve financial strength," Vale added.
But the lack of any buyers emerging confirms the thrust of the Reuters statement - that nickel is an unwanted involvement for the global mining industry, especially high cost operations.
The project was heavily over budget and years late when mining finally started up in 2010. It has accumulated losses of around $US1.3 billion from 2014 to 2016 - a black hole that has seen the list of possible buyers shredded. Selling the mine is part of a $US15 billion slimming program for Vale started by the previous CEO.
At an investor conference in New York this month Vale CEO Fabio Schvartsman said nickel had produced lower returns than expected and vowed to reduce new investments in the business
“We expect nickel to have more demand as it becomes a raw material for car batteries, but prices have not reacted so far,” Schvartsman said.
Reuters reported that Vale had been in talks with Chinese battery recycler GEM Co Ltd for several months about the stake in the mine, but those talks had o gone anywhere.
BHP has been trying for years to exit its nickel business in WA and has twice made that determination clear in recent months via statements from senior executives, including CEO, Andrew McKenzie at the Australian annual meeting earlier in November.
“Nickel West is non-core, shale is non-core,” Mackenzie told reporters following the company’s annual general meeting in Melbourne.
BHP acquired Nickel West in 2005 (in its takeover of WMC) and several attempts in the past to sell it have failed.
The miner allocated $43 million in August to build a processing plant to convert nickel into a powder-like material that could be used to make special batteries for electric vehicles, leading some analysts to believe the business will stay with BHP.
“We are just finding the right time in the market to offload,” Mackenzie told the media after the AGM.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.