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Vale (VALE) to Spend $121M to Extend Life of Thompson Mine

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Vale S.A (VALE - Free Report) recently announced a C$150 million ($121 million) investment that will help extend its mining activities in Thompson, Manitoba by a decade. Meanwhile, the company will continue the aggressive exploration drilling for known orebodies and search for new mineralization as it believes that the operations have scope beyond 2040. Notably, this is the largest single investment by the company made in the Thompson operations in the past two decades.

The expansion is a two-phase project and the current announcement represents Phase 1. It includes critical infrastructure such as new ventilation raises and fans, increased backfill capacity and additional power distribution. The changes are likely to improve current production by 30%.

The Thompson orebody was first discovered in 1956 by Vale following the adoption of new exploration technology and the largest exploration program to-date in the company’s history. Mining of the Thompson orebody began in 1961. Vale is committed to make the operations a safe, prosperous and sustainable nickel producer. Due to the increasing preference for electric vehicles, renewable energies and carbon reduction, the global demand for nickel has soared.  Thus, the company envisions the Thompson operations to become an integral part of green future and the low carbon solution.

Meanwhile, an ongoing strike since Jun 1, 2021 at Vale’s Sudbury operations in Canada has impacted nickel supply. Declining supply along with lower warehouse levels and high demand las led to higher nickel prices lately. Nickel prices are at around $18,356.50 per ton, up 10.9% year to date. The long-term outlook for nickel continues to be positive as its use in electric vehicle batteries will become an increasingly important source of demand growth.

Vale’s global Base Metals business is among the world’s largest producers of high-quality nickel and an important producer of copper and responsibly sourced cobalt. With headquarters in Toronto, Canada, and operations in Newfoundland & Labrador, Ontario, Manitoba, Indonesia and Brazil, the Base Metals business delivers critical building blocks for a cleaner and greener future. The Base Metals business has gone through a broad safety review of operational process, resulting in comprehensive overhaul of maintenance standards, procedures, training and oversight. Vale anticipates improvements from maintenance activities to materialize throughout the business in the second half of this year. The company is working toward transforming its base metals business and believes it will attain 500 ktpy (kilo tons per year) with projects already in pipeline — Salobo III, Alemao and Cristalino.

Recently Vale announced first ore production on its Reid Brook deposit at the Voisey’s Bay Mine Expansion Project in Northern Labrador. Home to one of the largest nickel deposits in the world, Voisey’s Bay has been producing nickel from an open-pit operation since 2005. The transition to underground involves the development of two underground mines — Reid Brook and Eastern Deeps — extending the life of Vale’s Labrador operations and achieving production of 40,000 tons of nickel in concentrate at a peak annual production rate of 2.6 million tons by 2025, with about 20,000 tons copper and 2,600 tons of cobalt as byproducts. The project is 65% completed, with executed capital expenditures of $1,260 million and Eastern Deeps expected to start operations for 2022. The ore produced at Voisey’s Bay is processed at Vale’s Long Harbour — one of the world’s lowest emission nickel processing plants. The sustainably-produced, responsibly sourced nickel, copper and cobalt products will help meet future customer demand in the electric vehicle and clean energy space.

Price Performance

Zacks Investment ResearchImage Source: Zacks Investment Research

In the past year, shares of Vale have soared 121.8%, compared with the industry’s rally of 118.2%.

Zacks Rank & Other Stocks to Consider

Vale currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Some other top-ranked stocks worth considering in the basic materials space include Cabot Corporation (CBT - Free Report) , Nucor Corporation (NUE - Free Report) and International Paper Company (IP - Free Report) . All of these stocks sport a Zacks Rank #1.

Cabot Corporation has a projected earnings growth rate of 137% for the current fiscal year. The company’s shares have appreciated 54% in a year.

Nucor has a projected earnings growth rate of 345% for the current fiscal. The company’s shares have rallied 134% in a year.

International Paper has a projected earnings growth rate of 73% for the current fiscal year. The company’s shares have appreciated 74% in a year.

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