The new boss of Vale SA’s base metals unit has reiterated a target of getting the sprawling nickel-and-copper business ready for a potential initial public offering by 2027, if not sooner.
Veteran mining executive Shaun Usmar was appointed as chief executive officer of the Toronto-based Vale Base Metals eight months ago with a goal of turning around the struggling division, against a backdrop of slumping nickel and cobalt prices.
Separating Vale Base Metals from its Brazilian parent as a publicly traded entity could allow it to command a premium over other metals producers, Usmar said in a Monday interview at Bloomberg’s Toronto office.
“Being able to do a spin out, being able to do an M&A transaction at the right time, maintaining the status quo depending on the market conditions — these are all legitimate future states,” Usmar, 55, said. “But there’s no downside to setting the business up for an IPO.”
While Vale and its executives have raised the idea of an IPO in the past, Usmar’s latest comments reinforce how the Brazilian mining giant is still actively weighing a move that could create a standalone entity to rival other base metals producers such as BHP Group and Glencore Plc.
Vale, which also produces iron ore from massive mining operations in Brazil, has talked about an IPO of its base metals operations for more than a decade. Vale split the business from its iron ore operations in 2023 and agreed to sell a 10% stake in the newly separated subsidiary to Saudi Arabia for $2.5 billion.
Selling shares in base metals division would help finance an ambitious plan to spend as much as $30 billion to boost production capacity across its nickel and copper mines in Canada, Brazil and Indonesia.
Usmar contends that he can unlock value in Vale Base Metals by cutting costs and demonstrating consistent operational performance. The business includes large-scale legacy nickel operations in Sudbury, Ontario, which Vale acquired in 2006 through its $17 billion takeover of Inco Ltd. during a round of mining industry consolidation that accompanied the China-fueled commodities boom of that period.
Usmar said a publicly traded Vale Base Metals could command a share premium to other global metals producers. Stocks of large mining companies including BHP, Vale and Rio Tinto Group are trading at three to five times their earnings before interest, taxes, depreciation and amortization.
“A portfolio like this should be trading at double that level,” Usmar said, suggesting Vale Base Metals would trade at something closer to 10 times its earnings.
As part of Usmar’s overhaul, the 30-year mining veteran has marked the producer’s Thompson nickel mine in Manitoba for a strategic review. The company aims to wrap up the process by the second half of the year, and one outcome may be selling the 69-year-old Canadian asset.
Usmar has experience working at some of the world’s largest mining companies. He previously worked at BHP Billiton, Xstrata Plc and Barrick Gold Corp. before founding Toronto-based Triple Flag Precious Metals Corp. in 2016.
On IPO timing, Usmar raised the prospects of being ready even earlier than his 2027 goal. “I always err on the side of probably seeing if we can push to be more aggressive than not,” he said.
Usmar said the ability to demonstrate “successful execution” of the division’s operations from one quarter to the next will be key to being IPO-ready in a reasonable time frame.
“We’re delivering against an organization that struggled to deliver for a long time — that’s just the reality,” he said. “IPO readiness is the prize.”
(By Jacob Lorinc and Mariana Durao)
