14 de enero de 2015 / 19:23 / hace 3 años

Vale's nickel unit a good target for X2 but higher price needed

RIO DE JANEIRO/LONDON, Jan 14 (Reuters) - Vale’s nickel business is a good target for former Xstrata CEO Mick Davis, but his reported offer price is probably too low, considering the Brazilian miner’s stated interest in only selling a minority stake, analysts and banking sources said on Wednesday.

On Tuesday, Bloomberg reported that Davis, who runs London-based mining startup X2 Resources, is considering a $5 billion to $7 billion offer for Vale’s nickel assets.

A spokesperson for Vale, the world’s second-largest producer of nickel, told Reuters on Tuesday no offer had been received and no talks held.

A spokesman for X2 also declined to comment.

“Any offer at this level... would be far too low for Vale to consider, in our view,” Citigroup analyst Alex Hacking said in a client note.

Hacking valued the business at around $20-25 billion, given an average expected EBITDA, a measure of profit from operations, of as much as $4 billion.

Vale valued its base metals business (nickel and copper) at $30-35 billion in December when it said it was considering listing 30 to 40 percent of the division in Toronto as a separate company.

That price, however, was based on an expected rally in nickel prices that has failed to materialize. The price of nickel has fallen 14 percent in the past month.

Despite X2’s low reported valuation, industry sources say the nickel business is a good option for Davis, who has struggled to find the right assets to buy since raising about $4.8 billion from equity investors.

“This is exactly the kind of deal they should do,” a source close to Davis told Reuters.

Despite the recent fall in prices, nickel could soon rebound, a Reuters poll found in October. A world nickel surplus is expected to flip into deficit this year due to major producer Indonesia’s ban on exporting nickel ore.

That makes it unlikely Vale will accept Davis’ reported price. With the price of iron ore .IO62-CNI=SI, Vale’s main source of revenue and profit, languishing at half-decade lows, Vale needs alternative sources of cash flow. The nickel division could account for as much as 40 percent of Vale’s total EBITDA this year.

Some also raised Vale’s close relationship with the Brazilian government as a possible hurdle.

“I wouldn’t be surprised if cutting a deal with Vale is exceptionally challenging... No one is likely to be able to do a deal without the government buying in,” a market source said. (Reporting by Stephen Eisenhammer and Silvia Antonioli; Editing by Diane Craft)

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