Vale’s base metals chief vows to turn around underperforming Sudbury nickel mines

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The head of Vale SA’s base metals group is vowing to turn around its poorly performing Canadian nickel operations, as the Brazilian mining giant makes a play for a bigger piece of the fast-growing EV-battery-minerals market.

Vale entered the Canadian nickel market in 2006 when it paid $19.4-billion to acquire Inco Ltd., a company that had mined the critical mineral in Sudbury for a century.

Despite Vale investing tens of billions in its Sudbury operations, output has fallen significantly over the years. Production costs have climbed as the company is forced to mine deeper into the earth, and grades are also on the decline.

The miner has also repeatedly pinned production shortfalls on maintenance issues. Last year was particularly challenging in Sudbury, with production sidelined for two months owing to a strike. Meanwhile, 39 workers were trapped underground for about three days at its Totten mine because of a mechanical issue with the cage that lowers people into the mine.

Late last year, Vale made a significant leadership change to its base metals unit, replacing executive vice-president Mark Travers with 46-year-old Deshnee Naidoo. A chemical engineer by training, she grew up in South Africa and has worked in the mining industry her entire career. Before Vale, Ms. Naidoo ran the zinc business at Indian mining company Vedanta Resources Ltd. Prior to that she worked at Anglo American PLC for many years in various roles, including chief financial officer of the thermal coal business.

Fixing the Sudbury unit is a big part of Ms. Naidoo’s job because Vale has a massive opportunity to become a player in EV metals. At the moment, the business is small for Vale, only accounting for about 10 per cent of its Class 1 (high purity) nickel sales. However, the company has started to sell some of its Canadian-mined nickel to the electric-car industry, recently signing an agreement to supply Tesla, the most valuable car company on the planet. Over the long term, Vale is hoping to sell up to 40 per cent of its Class 1 nickel to the EV industry.

“In terms of what’s happening in electric vehicles and batteries, that is absolutely a catalyst for why this turnaround needs to finally happen right now,” Ms. Naidoo said.

Among the plans she has under way are staffing changes, spending more on exploration work in Ontario, fine-tuning around 30 technical mining studies that are currently in progress at the company, and improving efficiency at the mine sites.

Increasing output at Sudbury is a key part of Vale’s strategy to improve its base metals performance. The company took a small step toward that goal with the completion on Thursday of a $945-million expansion of the Copper Cliff nickel and copper mine. Copper Cliff is one of five big nickel mines that Vale owns in the Sudbury region. The five-year project included the construction of a 12-kilometre tunnel connecting the south and north shafts of the mine, as well as the installation of a new ventilation system. The expansion will see Vale double its yearly copper and nickel ore production at Copper Cliff and create 270 jobs.

Vale is also considering the construction of a new refinery in Quebec to process battery-grade nickel, which would be the first of its kind in Canada. Earlier this week, federal Industry Minister François-Philippe Champagne told The Globe and Mail that Ottawa is in talks with Vale about investing in the project. Ms. Naidoo said Vale will make a decision on the plant by the end of the year, and it could begin construction in 2024.

Ms. Naidoo also comes to the job when there is some uncertainty surrounding the long-term future of the base metals unit. Earlier this month, the Financial Times reported that Vale was considering selling as much as 15 per cent of that business, which includes its Sudbury operations as well as massive nickel mines in Indonesia. The company later confirmed it had hired advisers as it weighs alternatives to “unlock long term value to its shareholders.” Ms. Naidoo said the company needs to get its house in order before proceeding with any major transaction concerning the unit.

While Vale is a major player in Canada in nickel, globally it is far better known for its iron ore business. The ferrous metal accounts for the bulk of its revenue.