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Strong electric vehicle demand supports Manitoba nickel mine, says Vale

Vale's ambitious drilling program could trigger a billion-dollar investment
gary annett vale thompson chamber of commerce june 1 2022
Gary Annett, head of Vale’s Manitoba operations, speaks to the Thompson Chamber of Commerce, June 1.

An ambitious drilling program could lead to a billion-dollar investment in Thompson, says Vale Ltd.’s top executive in Manitoba.

Speaking to the Thompson Chamber of Commerce on June 1, Gary Annett, the head of Vale’s Manitoba operations, highlighted current exploration work as well as the company’s moves to take advantage of increasing demand for nickel as a key component in the production of electric vehicle batteries.

Now in his second stint as head of Manitoba operations, Annett grew up in the Sudbury area and started his mining career as an underground miner before attending university and returning to work in the management side of the industry.

Thompson’s mines currently produce about 15 per cent of the nickel for Vale’s North Atlantic operations, but Annett said that ongoing exploration could lead to as much as 30 per cent growth in production, depending upon what the drilling program finds.

As much as $260 million could be spent on drilling and exploration of the Thompson ore body in the next five years, said Annett, during which time the demand for nickel is expected to grow as more and more consumers switch from gas and diesel-powered vehicles to electric models.

Thompson is in a good position to benefit from that transition due to the quality of its ore, although that does have drawbacks as well.

“What’s good about the Thompson mine ore is it’s primarily nickel, and there’s not much other impurities in it,” Annett said.

The lack of other minerals means some instability in operating revenues when demand for nickel is down, as it has been for the past decade or so, because there aren’t other metals present in significant quantities to help make up for sluggish nickel demand.

But Vale recently signed a long-term deal with Tesla to supply the top-grade nickel required to produce electric vehicle batteries. Vale anticipates that segment of the market rising from about five per cent of its nickel sales today to as much as 30 to 40 per cent over the next five years.

While the net impact on demand will likely mean slower growth for actual revenues, it’s still good news for the company’s Manitoba operations.

“People are starting to notice that there’s only so much Class 1 nickel in the world to develop this technology,” said Annett.

At present, about eight to 12 drills are operating at any given time as Vale seeks to prove if there is sufficient ore to justify expansion of mining in the Thompson area. An expansion could trigger the investment of close to a billion dollars.

“It is one of the biggest programs I’ve seen in my 24-year career,” Annett said, which is a positive indicator. “You always want to be drilling in mining.”

However, the company’s Canadian operations are competing for capital investment with other divisions. This means strong results from exploration work will be needed for the Thompson operations to see higher employment.

Currently, there is about one contractor working in the Thompson operations for every 1.5 permanent employees. Annett said the use of contractors doesn’t necessarily mean that huge sums of money are flowing out of the community, as Thompson residents are among those employed by Vale’s contractors.

Vale is also shifting to using more electric vehicles itself, recently purchasing seven for use underground. It plans to invest in more. 

The use of electric vehicles not only shows its support of the sector but demonstrates its sustainability credentials. Vale is already recognized as a low-carbon producer, an advantage when marketing its nickel to customers who want to source products in a way that does as little harm as possible to the environment, and the investments in electric vehicles will bolster that status.