Transcript
WZ: There are several reasons. One is the relatively low nickel price, which is down to about a third of what it was at its peak a decade ago. Hopes of a substantial recovery have not materialised. The plant has also been plagued by a raft of problems which caused costly delays. There were acid spills, protests and also sabotage that inflicted dozens of millions of dollars in damage. And significantly, with the disaster in Brazil in January when the Brumadinho dam burst and almost 300 people died, Vale suffered a bodyblow and prompted a rethink of its operations. And obviously, this means pulling out of New Caledonia.
BRD: So what is for sale exactly?
WZ: For sale is a 95 percent stake in the subsidiary Vale New Caledonia company, with the remainder being owned by a company made of the three provinces. Vale says the sale will be administered by Rothschild. The plant also owns a power plant and huge nickel ore reserves at Prony-Pernod, part of which Vale doesn't want to process but to sell, and for that it will need the consent of the New Caledonian government.
BRD: So what is likely to happen next?
WZ: Vale says while this sale process gets underway, the company will embark on a new strategy. It will close its nickel refinery which will cause job losses. Discussions with the unions will be held over the next few days. Vale will instead concentrate on producing nickel hydroxide cake which is used in batteries of electric vehicles. Combined with the sale of ore this re-orientation is hoped to stem the losses. The figure given is $US200 million a year.
BRD: How much of shock is this decision by Vale?
WZ: It is not that big a surprise. All of New Caledonia knows that the huge nickel sector is facing difficulties. Two years ago when Vale got a new CEO, there was talk of mothballing the plant unless there was some outside investment. The unions at time feared that it could unleash the biggest wave of job losses the territory had seen. Last week, Vale had already advised some unions of what was planned and an initial reaction was that it was better to lose or redeploy some staff than for everybody to get laid off.
BRD: Who are likely buyers?
WZ: Nothing has filtered through, but speculation is that there might be interest from South Korea or China. Other names that are being bandied around include Tesla. It appeared that the suggested closure of Vale two years was reconsidered when more reports emerged of an expected increase in the demand for nickel for car batteries.
