Vale will stay [in Sudbury]: Analyst – by Sebastien Perth (Sudbury Star – October 26, 2012)

The Sudbury Star is the City of Greater Sudbury’s daily newspaper.

A leading mining analyst thinks Vale is likely to hold onto its Sudbury operations, even though executives with the Brazilian mining company said Thursday it plans to sell underperforming assets to control costs and boost profit.

However, Raymond Goldie at Salman Partners said he believes Vale’s Sudbury operations are flexible enough to stay off the auction block. Goldie said while nickel prices are depressed, copper, platinum and palladium prices are “pretty high. My speculation was not that they would sell assets in Sudbury, but they would focus less on nickel-rich ore and focus more on copper, platinum and palladium-rich ore.”

He said unlike Sudbury, many of Vale’s mining operations are one-trick ponies where the company can only mine one mineral.

“(Vale) would consider Sudbury less for sale because you have the possibility of switching mining from nickel to copper and precious metals. Some of Vale’s other mining operations, such as the problem- plagued Goro nickel operations in New Caledonia, it’s nickel or nothing.

“They would be more likely to sell their interest in Goro or Indonesia because they are mostly nickel and cobalt operations. They don’t have the flexibility of you folks in Sudbury.”

In Sudbury, Vale operates a smelter, refineries, a mill and six mines, and employs about 4,000 people.

Earlier this month, Vale announced plans to close the 100-year-old Frood Mine by the end of the year, while work on Totten Mine and the company’s $2-billion Clean AER project have been pushed back.

Cory McPhee, Vale’s vice-president of corporate affairs, told The Star the company has no plans to sell anything in Canada.

“There’s no assets for sale in Canada. Nickel is still a core business for Vale. I think what was reinforced by the board is that while nickel is still a core business at this point, it’s not a business they are looking to expand. The emphasis now is on turning the business around, making it a profitable business.”

He said the actions Vale has taken in Sudbury — closing Frood and slowing down other projects — are intended to make nickel operations more profitable.

“In the case of Frood, it was simply a 100-year-old mine that was experiencing lower grades, it was a remnant mining operation. In the price cycle we’re in it was a challenge to keep it profitable and competitive,” McPhee said.

In a conference call with analysts Thursday, Vale officials said with many metals prices near three-year lows, a decade of efforts to cut dependence on iron ore by expanding into nickel, coal, copper and fertilizers could be ending. Despite tens of billions of dollars of investment, only coal and fertilizers have come close to meeting expectations.

As the world economy slows, a 10-year boom driven by China’s hunger for raw materials may be over, Chief Financial Officer Luciano Siani said.

He also said Vale’s annual investment in new projects will likely peak this year at $21 billion.

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