Vale (NYSE: VALE) is its nickel and cobalt operations聽on the Pacific island of New Caledonia after failing to reach an agreement on the asset鈥檚 sale with Australia鈥檚 New Century Resources (ASX: NCZ).
鈥淰ale will now start the required steps to place VNC on care and maintenance, in preparation for a possible shutdown of the operation, should no sustainable solution be found in the coming months,鈥� the company said.
Melbourne-based zinc producer New Century first announced its intention to acquire a 95% stake of Vale Nouvelle Cal茅donie (VNC), the operator of the troubled Goro nickel-cobalt mine, in May. A final decision on the transaction was expected in July but was deferred to September.
New Century that its business analysis had concluded there was 鈥渟trong potential鈥� for sustainable long-term operations at Goro. Negotiations with various stakeholders, however, did not lead to a worthwhile venture, it said.
The Goro nickel-cobalt mine聽complex in New Caledonia has proven a financial burden for 痴补濒别听since it began operations in 2010
Vale, the world鈥檚 largest nickel and iron ore producer, noted it continued to explore alternatives for the assets, all of which include the company鈥檚 exit. It also said it had already begun taking steps for a potential shutdown.
VCN has proven a financial burden for 痴补濒别听since it began operations聽two years behind schedule in 2010.
Mounting issues, including a $1.6 billion-write down related to the ailing mines, pushed the mining giant to announce its intention to聽exit New Caledonia in December.
痴补濒别听cut in April its 2020 nickel production guidance聽to 200,000 鈥� 210-000 tonnes per year from 240,000 tpy to account for the anticipated loss of VNC鈥檚 60,000-tpy output.
Shortly after, the miner聽revealed it had received non-binding offers for VNC, which includes the Goro mine, a processing plant and the port of Prony. The complex is located on New Caledonia, a French territory which is a top nickel producing region globally.
Goro鈥檚 potential
Prices for nickel, one of the two main metals produced at Goro, have been hovering at their highest level in eight and a half months, around $10.25 per pound over the past few weeks. The surge was partly triggered by a sharp production decrease in the Philippines, the world鈥檚 biggest exporter of the material.
Analysts estimate the nickel market could face a shortage as soon as 2023. A recent announcement by Tesla boss Elon Musk aimed at locking supply of the metal used in the batteries that power its electric vehicles (EVs), seemed to confirm shortfall fears.
Musk promised a millionaire contract to any company able to provide Tesla with sustainable nickel, which helps cram more energy into cheaper and smaller battery packs, allowing EVs to charge faster and travel farther between plug-ins.
While Goro has the capacity to produce 60,000 tpy of nickel in the form of nickel oxide, it has never performed to full capacity due to design flaws and operational commissioning issues.
Last year, the mine churned out just 23,400 tonnes of nickel, slightly over a third of its annual capacity.
Had the transaction gone through, it would have become a major supplier of nickel and cobalt sourced from outside the Democratic Republic of Congo. The African country is currently the world鈥檚 biggest supplier of cobalt for the EV sector.
