Brazil's Vale Sees Ebitda In Base-Metals Division Surging

By Paul Kiernan

RIO DE JANEIRO--Brazilian mining company Vale SA expects cash generation from its base-metals division to roughly quadruple through next year as new copper and nickel operations ramp up and an Indonesian export ban drives prices higher, a company executive said Thursday.

Vale's base-metals division reported earnings before interest, taxes, depreciation and amortization, or Ebitda, of $1.64 billion in 2013, a 172% rise from the previous year. The division mainly comprises nickel, of which Vale is the world's No. 2 producer, and copper.

After spending some $6.72 billion on its base-metals business during the last two years--a figure that includes projects and sustaining capital expenditures--Vale is starting to see results. Nickel output rose 9.9% last year to 260,000 metric tons and copper production surged 27% to a record 370,000 tons.

Indonesia's government in January effectively banned exports of nickel ore. Since the country's ore accounts for more than 20% of world production of the metal, Vale expects a "significant" impact on the market.

Peter Poppinga, the company's executive director for base metals, said project ramp-ups at its Salobo copper mines in Brazil, its nickel operations in New Caledonia and Canada, and its Onca Puma nickel mine in Brazil should generate an additional $3 billion in Ebitda in 2015, compared with last year. A projected rise in nickel prices to $20,000 per ton from last year's average $14,900 should create another $1.5 billion in Ebitda for Vale, he said.

"[That] leads us to our $6 billion, which is very conservative because we think prices can be much higher than that because of the export ban in Indonesia," Mr. Poppinga said in a conference call. "If you go to 2014, the reality will be in between what we have today and what I just said, so it's something around $4 billion to $4.5 billion."

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