Samarco, a Vale-BHP JV, plans to raise $2bn in restructuring
Brazilian miner Samarco Mineracao SA, an iron ore joint venture between Vale SA and BHP Group, plans to raise $2bn in fresh capital as part of its plan to exit bankruptcy protection, according to court documents.
Samarco looking to raise $2bn to fund operations for the next five years
Samarco plans to raise the fresh funds from investors through a competitive process roughly 30 days after a Brazilian judge approves its restructuring plan, which has yet to be discussed with creditors.
The proceeds will fund its operations between 2022 and 2027. The company said in the court filings that the capital increase is vital for its continued operations in the coming years.
Beyond standard operating costs, the company must make payments to Renova, a foundation set up by BHP and Vale to compensate for a deadly dam burst at a mine in 2015.
Vale and BHP may fund this capital increase at least partially, reports Reuters. Both companies have been financing Samarco since the disaster.
Vale and BHP investing in the future for Samarco
In separate statements, Vale and BHP confirmed a proposed capital increase funded by investors, but did not comment on their potential contribution.
Samarco, which partially resumed activities in December, said the restructuring plan does not indicate any commitment from any specific investor in its proposed capital increase.
The fresh funding would buy class A preferred shares in Samarco, giving shareholders rights to receive dividends 1,000 times higher than what is paid to common shares, along with some privileges over class B shares, the documents show.
The planned capital increase underscores challenges Samarco is facing as it restructures 50 billion reais in debt after filing for bankruptcy protection in April.
The miner is also offering to convert debt into class B shares or a cash payout in 2041 equal to 15% of the current value of holdings. Samarco and creditors are close to starting negotiations on the plan, the source added.
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.