December 4, 2019 / 5:07 PM / 5 days ago

UPDATE 1-Vale to exit New Caledonia, eyes Indonesia to boost nickel output

* Vale wants to boost nickel output by 70%

* Working on two Indonesian projects with JV partners

* Aims to increase copper output by a fifth by 2023 (Adds details, background, quotes)

By Eric Onstad and Barbara Lewis

LONDON, Dec 4 (Reuters) - Brazil’s Vale SA plans to exit its troubled New Caledonia assets but still aims to ramp up nickel output ahead of rising demand for electric batteries, executives said on Wednesday.

The planned divestment of nickel operations in New Caledonia comes after Vale said last month it would write down the mine and incur a non-cash impairment charge of about $1.6 billion in the fourth quarter.

A year ago, the world’s top nickel producer unveiled plans to invest $500 million in the mine after failing to find a partner for the operation.

But on Wednesday, Chief Financial Officer Luciano Siani said Vale had decided to exit the operation, which has been beset by technical setbacks, a chemical spill and violent protests.

“We realised we don’t have the competence to raise the production levels with this technology to where we want it to be. We realise that others may have this competence,” he told an investors’ presentation in London.

Siani said Vale was examining all options in how to exit the unit and would make a decision in the first half of next year.

Last year, Vale’s New Caledonian operations produced 32,500 tonnes of nickel, down from 40,300 tonnes in 2017.

The company remained bullish on nickel. It aims to boost production of the metal by about 70% in coming years to 360,000 tonnes a year, mainly by expanding in Indonesia, said Mark Travers, Vale’s interim executive director for base metals.

“Nickel is poised for dramatic change,” he told investors, but did not specify a date for the higher production target.

While there is an oversupply of high quality nickel, the market is due to tighten in coming years as electric vehicle sales climb, Travers said.

The metal is currently mainly used as an alloy to make stainless steel, but it is a key component in electric vehicle batteries.

Vale has two nickel projects on the drawing board in Indonesia being developed with joint venture partners, Travers said.

The Bahodopi project is due to produce 70,000 tonnes a year of ferronickel and is being developed with Chinese partners.

Vale is also working with Japan’s Sumitomo Metal Mining Co Ltd in Pomalaa for a processing plant aiming for 40,000 tonnes a year of nickel output suitable for batteries.

Travers also said Vale aimed to increase copper output to 480,000 tonnes by 2023, up 20% from an estimated 400,000 tonnes next year. (Reporting by Eric Onstad and Barbara Lewis; Editing by Mark Potter and Emelia Sithole-Matarise)

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