RIO DE JANEIRO – Vale SA reached agreements to sell future production of cobalt for $690-million upfront as producers look to capitalize on the battery-commodity boom to raise cash for investments.
The deal includes $390-million from Wheaton Precious Metals and $300-million from Cobalt 27 Capital, the companies said in separate statements Monday. Vale will "sell an aggregate total of 75% cobalt stream," with deliveries to begin January 2021.
The funds will help pay for a $1.7-billion project to mine underground at the Voisey’s Bay complex in Canada, an operation that predominately churns out nickel.
The Brazilian miner announced the expansion plans alongside local government officials earlier Monday. Vale had been looking for financing to extend the life of the mine by transiting to underground from open-pit operations and had said a so-called streaming arrangement was among options.
In streaming, an investor provides upfront funding to miners in exchange for a share of their future output. Historically, they have tended to be for precious metals like gold and silver, but the boom in cobalt prices has added a new commodity to the mix.
“We’re pretty excited about the deal,” Wheaton CEO Randy Smallwood said by telephone. “We know there was more than us in the space but it got narrowed down to the two of us pretty quick.”
The stream is expected to increase Wheaton’s operating cashflow by more than 10% starting in 2021, he said.
Wheaton still has "lots of firepower" for additional streaming transactions and expects to announce a precious metals deal of between $300-million and $500-million in the next few months, he said.