A mining giant best known for iron ore aims to nearly double its copper output as data centers and electrification lift demand for the metal.
Copper is essential to data centers, power grids and electric vehicles, and demand is expected to keep rising.
Annual copper production stands at about 380 kilotons, against a target of 700 kilotons within five years from the Carajás region in northern Brazil. Rail lines and other infrastructure are already in place there, which the miner says halves the capital needed compared with a typical greenfield project.
“We’ll continue to be a diversified company, but certainly with a higher share coming from our copper story,” said Gustavo Pimenta, Vale's chief executive.
“We believe iron ore, medium to long term, has a role to play in urbanization, decarbonization and population growth. But certainly our copper story will grow substantially in the coming years. We have two projects under construction as we speak,” he said.
Often asked about acquisitions, Pimenta said Vale would rather develop its existing deposits in Brazil than buy rivals.
Vale Base Metals (VBM), the group’s copper and nickel unit, accounts for about 30% of group earnings before interest, taxes, depreciation and amortization (EBITDA). Pimenta expects that share to rise above 40% in the coming years.
He said a VBM listing could help fund growth but is a means to an end and not imminent.
Founded in 1942 and based in Rio de Janeiro, Vale is the world’s largest iron ore producer. Carajás, in the northern state of Pará, hosts its biggest iron ore mines and its Salobo and Sossego copper operations. Within five years, Vale expects iron ore output to reach about 360 million tons.
Balanced despite Simandou
Pimenta was speaking at the FT Metals & Mining Summit, organized by the Financial Times (FT) in London on October 15. FT commodities correspondent Camilla Hodgson moderated the keynote interview on iron ore, copper and Brazil’s mining ambitions.
Rio Tinto and Chinese partners have begun shipping from Simandou in Guinea, designed to produce up to 120 million tons a year. Pimenta said depletion removes 60 to 80 million tons of supply each year, which Simandou will help offset over the next few years.
“The view we have is that the market will continue to be balanced because of the amount of depletion that we are seeing in our space,” he said.
Alumina is an impurity that raises energy use and slag volumes in blast furnaces, so producers blend ores to keep it in check. Pimenta said Simandou’s ore has higher alumina content, which will raise demand for low-alumina ore, such as Vale’s Brazilian supply, to blend with it.
China’s crude steel output is slightly down this year at just over 1 billion tons, as manufacturing replaces property.
“Demand in China continues to be solid. We’ve seen that shift in the Chinese economy, but we are also seeing growth outside China,” he said.
Elsewhere, Pimenta, who recently visited Vietnam, said the country is tripling its crude steel production. India is growing too, and he cited a recent report projecting that its steel output could rise from 170 million tons to about 600 million tons. He said this growth outside China is encouraging for long-term demand.
“We are seeing China reducing but not substantially, continuing to be a very important market for us. Our view is that medium to long term, even with Simandou, the market remains balanced,” he said.
Brazil’s untapped endowment
Luiz Inácio Lula da Silva won Brazil’s presidential runoff against Flávio Bolsonaro on October 25. At the summit 10 days earlier, Pimenta said mining accounts for about 4% of Brazil’s gross domestic product, compared with more than 10% in Australia. A recent Vale study set out how Brazil could unlock its potential.
“Mining is already very relevant in Brazil. Brazil has an enormous endowment, which could be unlocked. For the country, it would be an enormous opportunity given the endowment that we have there,” he said.
Mining is increasingly discussed in Brazil, including how to speed up licenses while ensuring the industry develops responsibly. Pimenta said both candidates had been focused on unlocking that potential and that the mining agenda was aligned with either side of politics.
“Doesn’t matter if it’s right or left. This is good for the country, and that’s our wish,” Pimenta said.
Vale has held talks with the US, Europe and others keen on Brazilian minerals, from rare earths to copper. He said global interest is high, and Brazil will also see projects from other mining companies developed there.
Washington has been seeking critical mineral supplies outside China, which dominates rare-earth processing and many battery metals.
“Brazil has this unique characteristic of having the scale, quality, the good jurisdiction and infrastructure to supply the US, Europe and many others. So we’ve been in conversations with all of them,” he said.
Mining is essential to the energy transition and digitalization, yet the industry still struggles to win public trust.
“If you run any survey where we compare the perception of mining vis-à-vis other sectors, unfortunately, we are one of the lowest in terms of public perception,” Pimenta said.
He said the industry must show that it improves lives and communities while preserving the environment. He cited Carajás, where Vale says it uses only 2% to 3% of the territory and helps protect 800,000 hectares of forest, about five times the size of London, while land outside it has been used for other purposes.
“We are convinced that we can work towards a future where we can not only provide what is essential, but we can make the world better,” he said.
China buys most of the world’s seaborne iron ore, and its state-backed buyer, China Mineral Resources Group (CMRG), held protracted talks with BHP last year. Pimenta said Vale’s talks with CMRG cover decarbonization and ore-blending solutions, and he is optimistic as they continue in the coming years.