Exclusive - Vale delays sale of stake in New Caledonia nickel mine: sources

By Tatiana Bautzer and Nicole Mordant

NEW YORK/VANCOUVER (Reuters) - Vale SA has decided to postpone the sale of a stake in its New Caledonia nickel mine after the world's largest iron ore producer decided initial bids were too low, two people with knowledge of the matter said.

The sale may be delayed for up to a year as the company anticipates a rebound in nickel prices, the sources said, requesting anonymity because they were not authorized to speak publicly on the matter.

One source said Vale was seeking an investment of $500 million to $1 billion in New Caledonia, which have been beset by technical setbacks, a chemical spill and violent protests by locals.

 

The company has recently reduced its debt burden, and new Chief Executive Officer Fabio Schvartsman has been conducting a broad strategic review.

Vale had been in talks with Chinese battery recycler GEM Co Ltd <002340.SZ> for several months about the stake in the mine, but those talks stalled, the sources said. GEM did not reply to requests for comment sent by Reuters.

Makers of rechargeable batteries for electric vehicles are looking to lock in supplies of cobalt, lithium and nickel, which are key battery ingredients.

Vale and its adviser on the sale process, Canada's Bank of Nova Scotia , did not reply to requests for comment. Overbudget and years late when it finally started up in 2010, the New Caledonia project accumulated nearly $1.3 billion in losses between 2014 and 2016, according to a June presentation to investors. This has also narrowed the field of potential bidders, the second source said.

At an investor conference in New York this week, Schvartsman said nickel had brought Vale lower returns than expected and vowed to cut 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.

Murilo Ferreira, whom Schvartsman replaced as CEO in May, had decided to sell the New Caledonia nickel mine as part of a $15 billion divestiture plan announced in 2016 to reduce Vale's debt.

The company's net debt shrank 18 percent in the 12 months through September to 21 billion reais ($6.4 billion). It stood at 4.9 times earnings before interest, taxes, depreciation and amortization, down from 8.6 times a year earlier, according to Thomson Reuters data.

(Reporting by Tatiana Bautzer in New York and Nicole Mordant in Vancouver; Additional reporting by Marta Nogueira in Rio de Janeiro, Melanie Burton in Melbourne, Susan Taylor and John Tilak in Toronto and Tom Daly in Beijing; Editing by Lisa Von Ahn)