December 2, 2014 / 2:37 PM / 4 years ago

UPDATE 1-Brazil's Vale mulls listing part of base metals business -sources

(Adds details, background, sourcing)

Dec 2 (Reuters) - Brazil’s Vale SA is considering listing part of its global base metals business in Toronto and London, according to multiple sources with knowledge of the plan, as the miner looks to fund capital projects amid a collapse in iron ore prices.

The sources, who asked not to be named because they have not been authorized to discuss the matter publicly, said Vale, the world’s top iron ore producer, is likely to retain a majority interest in the new entity if it proceeds with the plan.

Vale could outline the broad details of the plan for Toronto and London as early as Tuesday at an investor day event in New York, said one source. The event at the New York Stock Exchange will be webcast.

A second source said Vale will mention the possibility of an initial public offering in those markets at the investor day, but added plans are preliminary and will be deliberated on in the next few weeks.

A third source said there have been significant discussion inside Vale about listing the base metals assets, as they have fared better than the iron ore business due to steadier prices.

Another source said an update for investors on this plan is set to come shortly and that Vale has had it on the back burner since 2009.

A Vale spokeswoman in Brazil declined to comment.

Vale Chief Executive Officer Murilo Ferreira is the former head of the company’s base metal assets, headquartered in Toronto. Vale recently named Jennifer Maki, a longtime Vale finance executive, as head of its base metals arm in Canada. She is the first Canadian to head the business and replaces Peter Poppinga, who moved back to Brazil to head Vale’s iron ore business.


Vale’s iron ore business contributed 62 percent of the company’s gross revenue in the third quarter. Outside of iron ore, Vale’s global asset portfolio includes nickel assets in Canada, Indonesia and New Caledonia, coal mines in Australia and Mozambique as well as copper projects in Canada, Brazil and Zambia.

Prices for iron ore have fallen by half this year to five-year lows below $70 a tonne as Vale and rival mining behemoths Rio Tinto and BHP Billiton cranked up output at a time when demand from China, the steelmaking ingredient’s chief customer, has waned.

UBS has estimated it costs Vale $67 to produce a tonne of iron ore and get it to China, a tight squeeze as the company looks to complete its $20 billion Brazilian iron ore project known as S11D.

Vale has already said it expects to reduce its 2015 capital budget to below an originally anticipated $12.5 billion. But with S11D vital to Vale’s strategy of protecting its iron ore market share and reducing production costs, the company has little room to maneuver and is pressing on with investing in the core venture, the world’s largest iron ore project.

Other industry insiders, who have worked closely with Vale in the past but are not privy to any announcement, said selling a minority interest would make sense in the current environment and enable the miner to raise cash.

JPMorgan analyst Rodolfo Angele said in a note to clients on Monday that investors at the analyst day event will likely be looking for updates on Vale’s Mozambique coal divestiture plans, as well as details on other asset sales and a potential IPO of the base metals division.

“We note that lack of details on any of these measures would likely disappoint the market, but a more definitive action would be seen positively,” said Angele. (Reporting by Nicole Mordant in Vancouver, Euan Rocha in Toronto, Silvia Antonioli in London and Guillermo Parra-Bernal in Sao Paulo; Additional reporting by Stephen Eisenhammer in Rio de Janeiro and Jim Regan and Sonali Paul in Sydney; Editing by Amran Abocar, Alan Raybould and Jeffrey Benkoe)

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