Vale Signs $690 Million in Cobalt Deals With Wheaton, Cobalt 27

(Bloomberg) -- 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 Corp. and $300 million from Cobalt 27 Capital Corp., the companies said in separate statements Monday. Vale will "sell an aggregate total of 75 percent 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 Chief Executive Officer 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 percent 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.

Vale Signs $690 Million in Cobalt Deals With Wheaton, Cobalt 27

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