Vale Mining Continues Expansion into Cobalt Markets

Brazilian mining giant Vale (NYSE:VALE) has just acquired the South African-based Metorex, a producer of copper and cobalt, with operations in the African copperbelt of Zambia and the Democratic Republic of Congo. The takeover is the latest in a series of high-profile moves into Africa by firms in Brazil, a nation emerging as a giant in the mining market.

On April 8, Vale announced that it has agreed to the terms of an offer to acquire Metorex for the amount of 7.35 South African Rands per share, totaling ZAR 7,524 million on a fully diluted basis, which is equivalent about to US $1.125 million.

Vale’s price is too low, considering the “limited number” of available copper producers, said Peter Yandle, a spokesman for London-based Fidelity, which manages about $246 billion of assets and owns 2.4 percent of Metorex, in an article with Business Day.

Metorex CEO Terence Goodlace responded by e-mailed to questions submitted by Reuters, saying:

“If there are other serious and ‘firm’ offers for Metorex, the company has a duty to consider them and will of course consider any such offers in the best interests of its shareholders.”

Vale was contacted by Cobalt Investing News for an interview, but the Department of Corporate Communications and Press said they do not have a spokesperson to talk about the Metorex bid at the moment.

Metorex has two operating mines, Chibuluma located in Zambia, in which it holds an 85 percent interest, and Ruashi in the DRC, in which it holds a 75 percent interest. The Ruashi operation has an estimated 4,500 metric tons per year of cobalt, based on proven and probable reserves. In 2010, Metorex produced 51,569 metric tons of copper and 3,622 metric tons of cobalt. In addition, Metorex has three projects in the DRC, one in the development phase and two in the exploration phase.

Vale already owns two nearby Central African copper and cobalt projects – Konkola North under development in Zambia and Kalumines under feasibility study in the DRC.

Vale has mining operations on every continent and in addition to being the second-largest mining company in the world, is also the largest producer of iron ore, and the second largest producer of nickel.

Last year Vale announced its plans to boost copper output by 45 percent, up to 1 million tons by 2015, as it seeks to diversify away from iron ore and into other markets.

Currently, Vale recovers cobalt as a by-product of nickel operations in Canada. In 2008, it produced 1472 metric tons of cobalt metal at it Port Colborne, ON refinery and 728 metric tons of cobalt hydrate at the nickel operations in Thompson, ON.