Vale Says Possible IPO of $35 Bln Unit Drawing Interest

Vale SA, the world’s largest nickel producer, said the potential sale of a stake in a unit valued at as much as $35 billion is drawing the attention of investors as the outlook for industrial commodities improves.

“There has been a lot of interest” in an eventual initial public offering of Vale’s base-metals division, Chief Financial Officer Luciano Siani, 44, said today in an interview after meeting investors in London. “The announcement that we are considering that option has raised the awareness. We should get more and more questions and attention on that.”

Vale, whose iron-ore business has been hit with slumping prices, said Dec. 2 that it may sell a minority stake in its metals-producing unit. The company is forecasting growing profits and output at the business as it seeks to move beyond a series of setbacks including strikes in Canada, plant faults in Brazil and an acid spill in New Caledonia.

Vale shares have dropped 43 percent this year, more than double the 17 percent average decline among peers tracked by Bloomberg.

The improvement of Vale’s base-metals division combined with a scarcity of nickel and copper stocks help explain the interest from investors in a possible IPO, Siani said in the interview. A decision to go ahead with the sale relies more on market conditions than the calendar, he said, adding that at this stage the producer considers a sale as only “an option” which won’t take place in the short term.

Earnings Target

Investor interest is also driven by the outlook for nickel and copper, Siani also said.

“Copper is the commodity that everyone likes and nickel itself has attracted a lot of attention,” he said. “There’s this forecast for increased nickel prices during 2015 and 2016 on the back of nickel deficits.”

Siani had said earlier this week in an interview with Bloomberg Television that the base metals unit, the company’s largest business after iron ore, may be worth $30 billion to $35 billion. The miner is targeting $4 billion to $6 billion in earnings before interest, taxes, depreciation and amortization, or Ebitda, at the division next year from $600 million in 2012.

Shares of Vale rose 1.1 percent to 18.70 reais in Sao Paulo today, the most since Nov. 28.

Nickel is the best performing major metal this year with a 21 percent rally in London. Copper is down 12 percent.

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