Spin-Outs in Mining Sector

The Emergence of Independent Growth-Oriented Ventures - Seite 2

In the case of Vale S.A. (NYSE:VALE), CEO Eduardo Bartolomeo told the FT Mining Summit back in October that his company was exploring separating off its copper and nickel unit from its primary iron ore business. Without specifying a date, Barolomeo implied that this would all go down in 2023, with the idea being to eventually grow the base metals unit as big as Vale is already today, which as of March 2, 2023 was valued at $80 billion.

Already it's been reported that General Motors is competing for a stake in Vale SA's base metals unit following its $650 million investment into the Thacker Pass Lithium project in Nevada. Up for grabs is 10% of its base metals business estimated to be worth nearly $2.5 billion, which Vale already now has a shortlist of potential suitors in place to evaluate before they pull the trigger.

"This thing can get even bigger than Vale," said Bartolomeo to FT.com. "Not tomorrow, not even next year — when you look long-term."

Most of Vale's nickel and copper assets were acquired via a 2006 $17-billion acquisition of Inco.

Another major spin-out underway is that of Teck Resources Limited (NYSE:TECK) (TSX:TECK-A, TECK-A), which is set to split into two world-class, independent companies: Teck Metals and Elk Valley Resources.

Teck Metals will be growth-oriented, with premier, low-cost base metals production, a top-tier copper development portfolio and a disciplined capital returns policy, while Elk Valley Resources will be a high-margin Canadian steelmaking coal producer, focused on long-term cash generation and providing cash returns to shareholders, with significant equity value accretion potential.

"This transformative transaction creates two strong, sustainable, world-class mining companies committed to responsibly providing essential resources the world needs," said Jonathan Price, CEO of Teck. "Both Teck Metals and [Elk Valley Resources] have high-quality operating assets and strong financial foundations, with talented and dedicated employees, committed to ensuring safe and responsible operations. The transaction simplifies the portfolio of each company, allowing for strategic and financial focus and the ability to pursue tailored capital allocation strategies. It provides investors with choice in response to the evolving investment landscape, and establishes a pathway to full financial separation of the two companies over time."