PDAC: Vale eyes doubling of copper output, CEO says

Brazilian iron ore giant Vale (NYSE: VALE) is targeting a doubling of copper output over the next decade as part of a plan to expand its footprint in three main commodities, CEO Gustavo Pimenta said.

Vale produced 382,000 tonnes of copper last year, its highest level since 2018, and the company has the potential to double that amount, Pimenta said Sunday. Record fourth-quarter production at the Salobo mine in Brazil’s northern Para state helped overall copper output rise 6% in the fourth quarter, Vale said in January.

“In copper we have an enormous opportunity to grow,” Pimenta said during a keynote address at the annual meeting of the Prospectors and Developers Association of Canada in Toronto. “We can double – if not more [last year’s production] – because we have the endowment, the infrastructure and the capital intensity of Vale to bring projects online is very competitive.”

Central to Vale’s strategy is the $12 billion Novo Carajas program, which aims to accelerate copper production at its Brazilian operations and optimize iron ore output. The program includes investments in technology, safety and maintenance in the country’s mineral-rich Carajas region.

“If I can double the size the copper business in Carajas with 20% capital intensity, that’s where my money should be,” said Pimenta, who joined Vale in 2021 as chief financial officer before being promoted to his current position.

Historical mistake

Vale plans to stick to its three main commodities – iron ore, copper and nickel – because previous efforts to diversify proved disappointing, Pimenta said. In addition to being the world’s biggest iron ore miner, Vale is the Western hemisphere’s largest producer of nickel.

“We are a big company so I’m not shutting the door [on expanding into other commodities] but I’m really focused on what we’re good at,” he said. “One of our mistakes historically was to go into commodities where we just didn’t know how to operate, in places that we didn’t know how to operate.”

“Today we have the ideal portfolio.”

This means that adding operations in new countries is probably off the table, Pimenta said.

“Today I would rather focus on the markets where we have operations – Canada, Indonesia and Brazil. That’s probably where we are going to be more successful,” he said. “In Brazil we have the regulatory framework, the endowment which makes the chances of not succeeding small. We can grow the investments in a better way.”

Demand boom

Miners such as Vale are riding the wave of a global demand boom that’s expected to stretch well into the next decade. Iron ore demand is projected to rise 35% to 302 million tonnes a year by 2035 while copper demand climbs 26% to 33.7 million tonnes annually, data compiled by Vale show.

Other metals should do even better. Lithium demand is projected to surge 168% to 3.19 million tonnes a year by 2035 while graphite demand is to jump 162% to 14.3 million tonnes and rare earths demand by 56% to 153,000 tonnes, the figures show.

“When we look into the future, the need for what we do is going to be substantially bigger. We have to increase the supply of minerals in general by a factor of five or six times,” Pimenta said. “There is no energy transition without mining.”

Iron ore growth

Iron ore, Vale‘s oldest business line, remains central to the company’s future, Pimenta insisted. After producing 336 million tonnes of the commodity in 2025, Vale is targeting 360 million tonnes by 2030, the CEO said.

“We think iron has immense potential. Iron ore will continue to grow as the population grows,” he said.

While Chinese demand has probably peaked, other countries are ready to pick up the slack, Pimenta said. During a trip to India last month, the CEO said he was struck by the amount of new infrastructure that will need to be built in the country.

“We’re not as negative in the iron ore market as many analysts. Iron ore is the foundation of what we do in infrastructure and manufacturing,” Pimenta said.

“Yes, China has probably plateaued but Taiwan is growing 10% year over year, as is India. So in general, the demand for iron ore continues to be very solid.”

Depletion

Supply constraints should also support prices. Rio Tinto’s (ASX, LSE, NYSE: RIO) new Simandou mine in Guinea won’t be enough to make up for resource depletion at older operations, Pimenta argues.

“Yes Simandou is there but the depletion is immense,” he said. “The mines are getting older. It’s more expensive to develop. When we model, we continue to be a long-term believer in the long-term fundamentals of the iron ore market.”