Vale SA, the world’s top nickel producer, hired Canadian law firm Stikeman Elliott LLP to help it prepare for a possible initial public offering of its base metals business, three people with knowledge of the appointment said.
The Rio de Janeiro-based company probably will choose bank advisers in the coming months as it considers the IPO, said the people, who asked not to be named because the matter is private. The sale is subject to a nickel-price recovery, they said.
In December, Vale told investors in New York that it was considering selling a minority stake in its base metals operations, the largest generator of revenue after iron ore, to boost cash. Vale forecasts increased profit and output from the operations, which is based on a 2006 takeover of Inco Ltd., after years of setbacks including strikes in Canada, design defects at Brazil plants and a New Caledonia acid spill.
Vale declined to comment on IPO advisers.
Michelle Di Rocco, a Stikeman Elliott spokeswoman, didn’t respond to e-mails and voice messages seeking comment. The Toronto-based firm also advised Vale in the Inco takeover.
The company wants to be in a position to decide on the offering by year-end, Chief Executive Officer Murilo Ferreira said June 10, echoing comments made April 30.
“Making a decision now doesn’t advance anything if we don’t even have the documents ready,” Ferreira told reporters in Rio, adding the company is getting unprecedented interest from banks to participate in the offering. “There are a lot of variables to be observed.”
Vale officials have said the company would only consider selling the stake if it can get a “fair price.” The unit may fetch a valuation of $30 billion to $35 billion, Chief Financial Officer Luciano Siani said in a Bloomberg Television interview in December.
At the time, Vale projected base metals earnings before interest, taxes, depreciation and amortization, or Ebitda, of $4 billion to $6 billion this year from $2.5 billion in 2014. Ebitda is now forecast at $3.1 billion to $4.6 billion, according to a presentation this month.
The Ebitda estimate reduction stems from using lower price forecasts, Vale’s press office said last week, without elaborating. While the December estimate was based on nickel at $21,000 a ton and copper at $6,600, the recent presentation includes a $14,500 to $21,000 nickel price and $5,800 to $6,800 for copper.
Nickel for delivery in three months rose $25 to settle at $12,750 a ton in London Wednesday, reducing a decline this year to 16 percent. Copper is down 8.8 percent in 2015.