EBITDA doubles despite nickel headwinds
Since becoming chief executive 15 months ago, Vale Base Metals barely resembles the company Shaun Usmar took over, even surprising the former Barrick Gold, Xstrata, BHP Billiton and Triple Flag Precious Metals executive.
EBITDA almost doubled in 2025 to US$2.3 billion, despite headwinds from nickel pricing.Vale Base Metals chief Shaun Usmar at the Future Minerals Forum. | Credits: FMF"60% of that was through management actions, not price. The opportunity here was to uncover an underappreciated asset suite to unlock their performance. You can see we're doing that. …"I originally thought it would take maybe three or even four years to change the performance trajectory, but the business has responded remarkably well," Usmar told Mining Journal.The turnaround and a free cash flow projection of $1 billion for 2026, means Usmar could have the company ready for an initial public offering in the second semester of 2026, which could be a more difficult decision for Vale than it previously anticipated, given the initial signs of recovery in nickel and the strong copper market."I need to present them with the maximum degrees of possibility, whether they want to maintain the status quo, IPO, or do otherwise," said Usmar.With copper the raison d'être behind a spate of mega merger proposals among the diversified miners, could Vale decide to reabsorb its offspring?Some market commentators thought Vale or VBM would have been a better fit for Glencore than the aborted attempt to merge with Rio Tinto. Indeed, VBM recently entered into a preliminary agreement with Glencore to jointly develop deposits in Sudbury, Ontario, Canada."Those possibilities are always there. The question is: what is the priority if the pure-play versus diversified cost of capital arbitrage is clear? … For me, Vale's priority for the carve out was very clear: to create the focus to unlock the value, which wasn't as easy to achieve in a diversified Vale. "We are doing that for them right now. That discipline, the execution will present Vale with those choices. They are the owner, so ultimately it is their choice"."The best use of our time is what we've been doing: deliver operationally, allocate capital, get the portfolio in shape, unlock the copper growth portfolio, and continue to grow the polymetallic nickel business," said Usmar.Copper VBM has a goal of doubling it copper production from about 350,000tpa to 700,000tpa, principally by developing Vale's dominant position I the Carajas region of Para, Brazil."I'm so excited about this. Since we spoke this time last year, we've done a restructure, overhead improvements, and a change in the operating model.""We have taken about a third of the capital out, the low capital intensities, which compare really favourably with what the sector has to offer."It's really meant that, with these projects, our returns have gone from mid-teens on average to really the mid to high twenties plus. The one we're executing now, we just got the license in January at Bacaba, a year ago was a mid-teen return: now it's over a 60% rate of return. We've halved the capital in that project, and we've accelerated it, and that's a change in approach and model," said Usmar. VBM has other copper projects yet to execute, such as the Salobo coarse particle flotation brownfield project, which as a more than 50% rate of return for 2029, and then the high-grade, underground copper-gold Alemão project."We have changed the mining method from sub-level cave to sub-level stoking and done a lot to accelerate and improve returns. That is now a 25% percent rate of return, with half a billion dollars of capital taken out," said Usmar.NickelVBM's nickel business is also benefiting from the Usmar touch. The company recently announced the creation of a partnership for the Thompson nickel complex in Manitoba, forming a new consortium to invest $200 million.A new company, Exiro Nickel Company, will be majority owned by Exiro Minerals and Orion Resource Partners, while VBM will hold a 18.9% minority stake. "Thompson has been in operation for more than 60 years, and has a huge mineral endowment, but we felt that we needed to set up a consortium to bring focus to that asset that has perhaps been lacking within our broader portfolio"."We launched a strategic process a year ago. It was a complex deal to get Exiro in there, along with Orion Mine Finance and the Canada Growth Fund, with new money to unlock the potential of that business and the endowments. We will be the largest customer and will support that consortium to be successful," said Usmar.The consortium deal comes as nickel prices rebound following decisions by the Indonesian Ministry of Energy and Mineral Resources to curtail production through its 2026 nickel ore mining quota , with the explicit aim of improving pricing."They've made some really dramatic cutbacks compared to prior years, and we've seen the market respond. …"You don't want a situation where you've got a chronically oversupplied market, but at the same time, they're going to look at it in order to make sure that prices are at a level where they extract the most economic benefit for their country, and that appears to be the path they're going on," said Usmar.Higher pricing will assist Usmar in returning VBM's nickel business to profitability, but that is not seen as him easing up on efforts to improve its cost position and increase production to 5Mtpa."We are focusing on the longer-term horizon to get that cost position of that polymetallic business in the lower half of the curve."We are well on track to do that so that even if things outside of our control in Indonesia or other policy changes, and demand equation changes, we'll be resilient through the cycle," said Usmar.VBM completed a $2.94 billion underground expansion at Voisey's Bay in December 2024."We ramped that up 20% ahead of our internal plans. That's given us the feed to go through Long Harbour to hit design capacity. That matters because you need the volume in these vertically integrated facilities to dilute the fixed cost that comes with all of that processing to make that globally competitive.""For the first time since Long Harbour was built, we hit design capacity after 11 years with this investment and performance.""That is a new record for them, and we'll continue in Sudbury.""We have taken down $250 million in costs and capital improvements in the nickel business alone last year through our restructuring. We have lowered overhead and we are increasing volume so we are able to get the benefit of fixed cost dilution. That is the game to be competitive. You don't want to rely on windfalls and pricing," said Usmar.
Shaun Usmar VBM Glencore Exiro Nickel Company Voisey's Bay Orion Resource Partners Sudbury Ipo
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