The incoming chair of a newly created base metals business at mining group Vale said he wants to focus on margins and marketing, with a mandate to prepare it for a possible public listing.
Mark Cutifani, the former chief executive of mining company Anglo American, who will take up the role at Vale in July, told the Financial Times, “As the mining industry, we tend not to understand and do terribly well in the marketing of our products.”
“I have always been one to focus on margins,” he added. “If we do that, then we think the market will potentially reprice the value of our business.”
Brazilian iron ore miner Vale is spinning out its metals business as a separate ringfenced entity headquartered in Toronto, with an independent board chaired by Cutifani. That process will be complete in July.
The unit is one of the world’s largest producers of nickel, copper and cobalt, with mines and processing facilities across Canada, Indonesia and Brazil. It is estimated to be worth around $22bn by analysts at RBC.
Vale’s chief executive Eduardo Bartolomeo said on an earnings call in April that Cutifani would help the business explore a “liquidity event”.
“An IPO down the road is a liquidity event that you could pursue,” Bartolomeo said in the call. “But the fundamental reason why we brought on Mark is to help us on the execution of this plan to this liquidity event — it could have several forms of liquidity.”
Vale is also selling a minority stake of up to 10 per cent in its base metals business, with a shortlist of bidders that includes sovereign wealth funds, pension funds and automakers, according to advisers familiar with the deal.
Although iron ore accounts for 80 per cent of Vale’s overall revenue today, Bartolomeo believes the base metals business could one day outgrow its parent completely.
Cutifani said worldwide shortages of the metals needed for the transition to cleaner energy — such as copper, cobalt and nickel — meant the base metals unit was well-placed to grow.
“There is an opportunity to build a different type of business from what we’ve seen in the past in mining,” he said, because of the need to secure supplies of energy transition metals.
Cutifani suggested Vale’s base metals unit could play a more significant role in marketing its products, and doing long-term deals with customers.
Vale already has a long-term deal to supply Tesla with nickel for its batteries. Former Tesla executive Jerome Guillen will join the board of the base metals unit.
The mining group has also teamed up with Ford and Huayou Cobalt on a $4.5bn nickel processing facility in Indonesia.
“There is an opportunity to build a different set of relationships with customers who are looking for certainty of supply on product that over the long term should improve our margins,” said Cutifani. “If we do that, then we think the market will potentially reprice the value of our business on the basis of that certainty.”
Vale expects to complete its sale of a minority stake in the base metals business by the middle of this year, and has not indicated a timeline on the possible IPO.
