‘Please mine more nickel’: Elon Musk is urging miners to increase production – here’s a name to capitalize on

Back in 2020, Tesla CEO Elon Musk urged miners to invest in increased production of nickel, a key component – and an expensive one – in the batteries that power electric vehicles. He even promised the companies a “huge contract over a long period of time” if they mined the metal in an environmentally friendly manner.

Perhaps there were no takers for Musk’s offer, because earlier in the year a Reuters report signaled that Tesla might be willing to open a factory in Indonesia in exchange for nickel mining rights. In case you’re wondering, Indonesia is the world’s largest nickel producer, while the Southeast Asian country also has an export ban on crude nickel.

Tesla is obviously looking for a way to cut costs, but it’s certainly not the only company that thinks mining nickel is a good idea. As electric vehicles become more popular, other companies focused on this endeavor could reap the rewards.

Here’s a look at a company that could benefit from growing nickel demand and a rising number of electric vehicles on the road, potentially making money for investors. Wall Street also sees advantages in this name.


Vale is a Brazil-based mining company with a leadership position in the mining industry. While the ranking may shift from year to year due to changes in overall production, Vale is consistently ranked among the top three global producers of iron ore and nickel, and the Company reported net operating income for 2022 of more than $43 billion.

Of particular interest to investors focused on nickel and electric vehicles, Vale has announced three important business updates over the past year that will solidify its position as the primary supplier of nickel to the electric vehicle industry. First, in March 2022, Vale signed a multi-year deal with Swedish company Northvolt AB, a manufacturer of lithium battery cells, to provide the low-carbon nickel needed for that company’s products. In May, Vale followed suit by confirming a deal to supply nickel to Musk’s Tesla. Finally, last November, Vale entered into a long-term agreement with General Motors that makes Brazilian company GM the primary supplier of battery-grade nickel sulfate. Vale will provide GM with 25 kilotons annually from 2026.

Vale recently released its sales figures for 4Q22. The numbers showed year-over-year declines in iron ore and copper production, but a 6% year-over-year increase in the company’s nickel production. For the quarter, nickel production reached 179 kilotons. The increase in production was complemented by increases in sales; Vale reported a 31% increase in nickel sales sequentially.

If we look at the company’s financials, we can see that Vale’s quarterly revenue fell 9% year over year to $11.9 billion. Bottom line, the company’s adjusted pro forma EBITDA was $5 billion compared to $6.9 billion in 4Q21. Vale’s Q4 EPS was 82 cents. The latest revenue and EPS numbers beat Street’s expectations, EPS by 19 cents, or 30%, and revenue by $560 million, or 5%.

VALE also pays a dividend that fluctuates quite a bit, although it yields an impressive 8.87% based on its current payout of $0.35.

Among the bulls is Jefferies analyst Christopher LeFemina, who lists several reasons Vale is one of his favorite names.

“Based on the consensus earnings improvement potential, the upside risk of seeing iron ore prices if China recovers, the upside potential of Vale’s returns on investments, and the company’s long-term growth in base metals, Vale is one of our top picks,” said LeFemina. “The company has high operational risk and its shares are likely to be particularly volatile … but we also believe these shares are undervalued at current prices.”

Consistent with this outlook, LaFemina gives VALE a Buy rating with a price target of $21, indicating a 1-year upside potential of ~32%. (To see LaFemina’s track record, Click here)

Overall, analyst consensus gives Vale’s stock a moderate Buy rating based on 8 recent ratings ranging from 5 to 3, favoring Buy over Hold. The stock is currently at $15.94 and its average price target of $18.69 implies it will gain ~17% over the next 12 months. (See VALE Stock Forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is for informational purposes only. It is very important that you do your own analysis before making any investment.

Source : finance.yahoo.com

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