Vale Delays Possible Base-Metal Division IPO – by Paul Kiernan (Wall Street Journal – April 30, 2015)

Nickel prices have fallen sharply from when the base-metal IPO idea was hatched

RIO DE JANEIRO—Brazilian mining firm Vale SA said Thursday it has pushed back the timeline of a possible initial public offering of its base-metals division after an expected rebound in nickel prices failed to materialize.

Vale had said in December that it was considering selling between 30% and 40% of the division on Toronto’s stock exchange around August. On Thursday, Chief Executive Murilo Ferreira said his management team’s new goal is to be ready to present a recommendation to Vale’s board of directors by the end of this year so that Vale might have the option of carrying out the transaction in 2016.

When they hatched the idea for the nickel IPO, Vale executives were predicting nickel prices would rise to around $21,000 per metric ton. Thanks to higher prices and production ramp-ups at a number of new or troubled facilities, they estimated the base-metals division would generate cash flows of between $4 billion and $6 billion this year.

Instead, Vale sold its nickel for an average $14,279 in the first quarter, and its base-metals division generated earnings before interest, taxes, depreciation and amortization of $678 million. The company said prices were hampered by “a slowdown in Chinese housing construction and bearish sentiment regarding Chinese economic growth.”

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