Vale (INCO) Has the Potential to Control 30% shares of EV Nickel Megaproject
18 Jul 2023, 08:00 AM
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PT Vale Indonesia Tbk (INCO) has the opportunity to acquire 30% stake in a nickel factory with high pressure acid leach (HPAL) technology in the Pomalaa Block, Kolaka Regency, Southeast Sulawesi owned by PT Kolacka Nikel Indonesia (KNI), five years after KNI complete construction of the facility. Currently, Vale holds 20% of the company's shares. The factory will produce mixed hydroxide precipitate (MHP), an intermediate nickel product that is used as raw material for electric vehicle ( EV ) batteries. In the nickel business tree, MHP is further processed into nickel sulfate, the positive pole (cathode) material (cathode) of EV batteries along with lithium, manganese/aluminum, and cobalt sulfate.Bayu Aji, head of communications at Vale Indonesia, emphasized that the company has the option to increase its share portion in KNI. If Vale chooses to exercise the option, the composition of KNI's shareholders will be Huayou (indirectly) 53%, Ford 17% and Vale Indonesia 30%."Currently, Huayou is the party responsible for the development of the HPAL, because it is the majority shareholder of KNI, while PT Vale is the minority shareholder," he told Investor Daily , Monday (17/7/2023).According to Investor Daily's records , the factory will produce MHP with a capacity of 120 thousand tons per year. The Pomalaa Block HPAL project will process Vale Indonesia's nickel ore from the Pomalaa Block mine.Initial site preparation for this HPAL project has commenced and full construction is expected to commence this year and commercial operations commence in 2026. This collaboration will provide critical materials for the automotive industry's shift to EVs, boost Indonesia's EV manufacturing industry, and support Ford's plans to produce production of 2 million EVs by the end of 2026 and further scale gradually.The three-way nickel processing project will collectively be combined with Ford's other nickel sources, thereby contributing significantly to supporting the US company's EV production target through the end of 2026. This includes separate supply agreements in development with Ford and Huayou for cathode precursor active material which is important for the manufacture of lithium-ion batteries. Capex estimateOn the other hand, JP Morgan held the JPM Asean Energy & Metal forum, 11-12 July 2023, which was attended by energy and mineral companies, including Vale Indonesia, PT Merdeka Copper Tbk (MDKA), PT Merdeka Battery Materials Tbk (MBMA), and PT Trimegah Bangun Persada Tbk (NCKL) or Harita Nickel.The discussion that developed in the forum was mostly about the progress of the snapper nickel project. In the case of Vale Indonesia, there is a project to build a ferronickel factory in Bahodopi with a capacity of 73 thousand tons per year and HPAL in Pomalaa and Sorowako with a capacity of 180 thousand tons per year.On that occasion, Vale Indonesia's management emphasized that there was a possibility of a delay in the Bahodopi project. However, Tisco, Vale's partner in the project, has received approval and the final funding scheme is expected to be issued in July 2023. So far, wrote JP Morgan, Vale and its partners have disbursed US$ 50 million in Bahodopi for land preparation.Investor Daily notes , Vale has worked on a nickel mining and smelter project in Morowali, Central Sulawesi (Central Sulawesi), which required an investment of Rp 37.5 trillion. This was marked by the laying of the first stone at the mining and smelter site . The smelter will be built and operated by PT Bahodopi Nickel Smelting Indonesia or BNSI, a joint venture between Vale Indonesia and Tisco and Xin Hai and will use rotary kiln electric furnace (RKEF) technology, which processes nickel ore into ferronickel with a capacity of 73 thousand tons per year.Vale holds 49% of the company's shares, while Tisco and Xin Hai hold the rest. The smelter will process nickel at the Bahodopi mine, Central Sulawesi, which is 100% owned by Vale Indonesia.The interesting thing, wrote JP Morgan, is that Vale's management predicts that Bahodopi and HPAL's capex will decrease, while cash funds for the HPAL project are likely to disburse in 2027. This is inseparable from Vale's option to increase its shareholding in KNI.In total, Vale Indonesia's capex in the next 3-4 years is predicted to be around US$ 1.5-1.8 billion, excluding the option to add KNI shares. JP Morgan believes this is not a problem for Vale Indonesia, because the company can earn US$ 300 million in EBITDA per year from selling nickel ore to the HPAL project.Image source: B-Universe Photo/Mohammad DefrizalSource: https://investor.id/market/335370/vale-inco-berpotensi-kuasai-30-saham-megaproyek-nikel-ev
