Brazil’s Vale to avoid driving down global iron ore market
Brazilian miner Vale SA will place caution before capacity as it seeks to avoid driving down the iron ore market and presses forward with its recovery from a deadly dam break in 2019.
Speaking at an interview during the Reuters Commodity Trading Summit, Luciano Siani, chief financial officer for Vale, says that the miner is prepared to raise its capacity using safer and less polluting methods to 450 million tonnes in about five years – almost 50 percent more than forecast production for 2020.
"We are going to be responsible and we are not going to overflow the markets with iron ore," he adds, asserting that the miner would not use full capacity if an expected surge in manufacturing-driven Asian demand does not materialise.
“The intent is not to oversupply the markets towards 450 (million tonnes). It is to have the capacity available to meet the market if the need be,” Siani explains.
As the only global iron ore miner with sizeable plans to expand capacity, Vale’s production decisions affect prices of steel products around the world. Its path to growth includes new mines in the north of Brazil, as well as reviving production at some of its older mines in the country’s traditional mining heartland of Minas Gerais.
In the third quarter of this year, the miner briefly recovered its status as top global producer after raising output slightly above its Australian competitor, Rio Tinto, the Reuters report points out.
The Australian firm overtook Vale after a deadly dam burst in the city of Brumadinho in 2019 left 270 people dead and obliged the Brazilian miner to shut down other risky dams holding mining waste.
“Everyone understands that the big swing factor in supply is Vale,” Siani says. “The good news is that the capacity is here, the mines are here, the processing plants are here, the railways are here.”
Although Vale reported losses last year following expenses related to the Brumadinho disaster, revenue continued to rise. A reduction in world supply after Vale shaved around a quarter from its production target for 2019 helped to fuel a surge in iron ore prices, which hit a six-year high in mid-September, Reuters says.
The mining firm says that it aims to eventually neutralise its indirect greenhouse gas emissions – it is expected to announce its first targets for ‘Scope 3’, which refers to emissions anywhere upstream or downstream the supply chain, as soon as next month.
Furthmore, Siani asserts that Environmental, Social and Governance (ESG) targets will be key moving forwards for Vale, as it looks to recover credibility with investors. By the time it reaches 400 million tonnes in about two years, the company expects to be a benchmark in safety and to eliminate the share discount over its peers, he adds.
“ESG plays a big part of what Vale intends to be in three years’ time, it is not all about production,” he concludes.
Vale invests $150mn to extend life of Manitoba operations
Vale has announced a $150mn CAD investment to extend current mining activities in Thompson, Manitoba by 10 years while aggressive exploration drilling of known orebodies holds the promise of mining well past 2040.
Global energy transition is boosting the market for nickel
The Thompson Mine Expansion is a two-phase project. The announcement represents Phase 1 and includes critical infrastructure such as new ventilation raises and fans, increased backfill capacity and additional power distribution. The changes are forecast to improve current production by 30%.
“This is the largest single investment we have made in our Thompson operations in the past two decades,” said Mark Travers, Executive Vice-President for Base Metals with Vale. “It is significant news for our employees, for the Thompson community and for the Province of Manitoba.
“The global movement to electric vehicles, renewable energies and carbon reduction has shone a welcome spotlight on nickel – positioning the metal we mine as a key contributor to a greener future and boosting world demand. We are proud that Thompson can be part of that future and part of the low carbon solution.”
Vale continues drilling program at Manitoba
Coupled with today’s announcement, Vale is continuing an extensive drilling program to further define known orebodies and search for new mineralization.
“This $150mn investment is just one part of our ambitious Thompson turnaround story. It is an indicator of our confidence in a long future for the Thompson operations,” added Dino Otranto, Chief Operating Officer for Vale’s North Atlantic Base Metals operations.
“Active collaboration between our design team, technical services, USW Local 6166, and our entire Thompson workforce has delivered a safe, efficient and fit-for-purpose plan that will enable us to extract the Thompson nickel resources for many years to come.”
The Thompson orebody was first discovered in 1956 by Vale (then known as Inco) following the adoption of new exploration technology and the largest exploration program to-date in the company’s history. Mining of the Thompson orebody began in 1961.
“We see the lighting of a path forward to a sustainable and prosperous future for Vale Base Metals in Manitoba,” said Gary Annett, General Manager of Vale’s Manitoba Operations.