November 17, 2017 / 6:47 PM / a year ago

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

NEW YORK/VANCOUVER (Reuters) - Vale SA VALE5.SA has decided to postpone the sale of a stake in its New Caledonia nickel mine after the initial bids for the asset came in at the lower end of expectations, two people with knowledge of the matter said.

The logo of Vale SA is pictured in Rio de Janeiro, Brazil, August 7, 2017. Picture taken August 7, 2017. REUTERS/Ricardo Moraes

The sale may be delayed for up to a year, as the Rio de Janeiro-based company anticipates a rebound in nickel prices, the sources said, requesting anonymity because they were not authorized to address the matter publicly.

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

The company has recently reduced its debt burden - one of the aims of recent divestment efforts - and new Chief Executive Officer Fabio Schvartsman is running 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.

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

Vale said the stake sale process is still ongoing and the company has received bids. Its adviser on the sale process, Canada’s Bank of Nova Scotia (BNS.TO), did not reply to requests for comment.

Common shares in Vale closed up 1 percent on Friday, extending their rise this year to 33 percent.Over budget 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 divest the New Caledonia nickel mine as part of a $15 billion asset sale plan announced in 2016 to reduce debt.

Vale’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 and Jonathan Oatis

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