Theo Yameogo

Welcome again. As I mentioned before, I'm thrilled to be joined today by Shaun Usmar, CEO of Vale Base Metals, as our keynote speaker. Shaun brings more than three decades of global mining experience having held senior leadership roles at Barrick Gold, Xstrata and BHP. Throughout his career, he has been at the forefront of transformative changes in metals and minerals, and today is leading efforts to shape a low carbon, sustainable future. And we’re excited to hear his insights today.

Shaun, thank you for being here. Let's begin with the big picture.

Shaun Usmar

Thanks Theo.

Theo Yameogo

So what's your take on the current state of metals and minerals sector across the Americas? I know we've seen a lot of major shift from geopolitical to capital flows, and more discussion around energy transition, and what feels fundamentally different about this moment for you?

Shaun Usmar

Theo, firstly, thanks again for the chance to be with you today. I'm not sure in my career, I've necessarily seen the confluence of some of the forces that we're witnessing from, you know, trade tariffs to levels of resource nationalism.

I think, a disparity between, certainly China's dominance and supply chains, which is not evident in things like rare earths and many others. And I'd say a Western ecosystem that, candidly, has atrophied. I think the entire ecosystem, we've seen a huge amount of capital spanning more than a decade with generous money leaving the sector.

We have struggled to attract, you know, new talent for the next generation. So, you know, I think there's, it's just a tale of two cities. And I think in some ways, if I think back to the Chinese example, you know, we saw them 20 years ago struggling to acquire businesses, becoming quite good at that, then building out mines in a very efficient way and adding new capacity and then dominating supply. And my view, in many ways is, if you think about it, I think the Chinese objective has really been about maximizing the entire value chain, dominating manufacturing globally.

And then, like Henry Ford did back in the day, you want to make sure that you've got abundant and low cost supply so that you're not trying to maximize economic rent just in each part, but you're ultimately looking to maximize your options and your opportunity over the entire ecosystem. So, you know, what does that mean? I think the manufacturing side, we've seen the Chinese now end up with, I think, producing more on the manufacturing side than the US, the Germans, the Brits, the Koreans, the Japanese combined.

And, you know, they've clearly taken up very strong positions, not just in rare earths, which is now suddenly come into stark focus. But, you know, we feel it in nickel where we have a strong position, obviously at Vale Base Metals. We've seen it in cobalt, and I think we see it in many other metals around. So we're seeing that where I believe the Western world has frankly lost sight of where the minerals come from.

I think whether it's NGOs or other groups make or we see extensions of permitting timelines, the more barriers we throw at responsible transparent producers to bring new supply on. It's not like that supply doesn't hit the ecosystem. I think humanity is worse off because it goes to places which at times are less responsible, less transparent.

And so this moment, I think, is a really interesting and exciting one. I think we're certainly seeing a renewed focus on the importance from a national security, and just from, you know, great powers trying to reconnect with the supply chains. We've seen a disconnect going back to the Ukraine war and even prior to that with COVID, where we saw supply chain shortages, you know, business models that previously were saying, just in time, we want to keep our working capital down, we've got an efficient global supply chain, suddenly was disrupted and we saw just massive supply chain disconnects during that period. We are clearly seeing that. And I think we're seeing a world order that is, you know, really being disrupted in real time and creating a lot of uncertainty, which also brings uncertainty to capital.

So I look at that on the one hand, as a series of quite disruptive forces, which I haven't necessarily seen in the last 30 years or so on a geopolitical basis. But at the same time, I think presents incredible opportunity, which is part of, the excitement at Vale Base Metals. I believe there's an underestimation of how long in the West it's going to take to rebuild that ecosystem. I think the Chinese have been very effective at not just trying to do things in their borders they’ve leveraged soft power. They've gone with where the minerals are, they focused in a very urgent way of bringing on new supply. And I think we underestimate, because I think a lot of our decision makers in government are being informed by people in sectors like, let's say, Wall Street and Silicon Valley, where talent is abundant and capital is too. And that's not the situation in mining.

So I think, I'm hopeful that this moment will be one which will redraw the connectivity between the enablers of this new world that we're seeing from artificial intelligence, technology and so on, with where it comes from and the importance of having responsible innovative providers of the minerals that are needed. And also then to inject the necessary talent, capital and capability and secure the supply chains for the future.

So I think it's the best of times and the worst of times, in many ways.

Theo Yameogo

You mentioned the supply chain and the global play. You are one of the large corporations who operates both in the north and the south. How do you see the opportunities and power play with the southern hemisphere going forward?

Shaun Usmar

I think the prognostication on the future here is, it was almost a futile act. I do think what's important in these moments is to make sure that organizations understand and are connected with their values, and that ultimately, the only, and we saw it in our organization with all the tariff uncertainty that kicked off in the start of the year.

The only thing I can control with our organization is that we can be as efficient and as competitive as we can globally. And that's against the backdrop of a sector that is often struggled to certainly be as agile as is necessary and to be able to marshal capital and deliver new supply in a reliable way. So if we are as a sector to provide the minerals that are needed in the future, attract the capital that is needed, I think we have to do a better job of being able to work with our host governments, our communities, regain the confidence of capital providers and find a way that we can, compete successfully to bring that back on. But I don't think it's going to be quick. Bear in mind, just in the last couple of months, you know, coming from Toronto, flying to Brazil a couple of months ago to our operations in the Amazon.

I would find that in Canada, we elbow's up and people are focusing on resilience and what do we do to, you know, make sure that our businesses are as resilient in the face of tariff uncertainty. I found my perception was that in Brazil, that wasn't really a feature at the time. People weren't focusing on it as much because it wasn't a clear and present issue for them. Fast forward some weeks and of course 50% tariffs; we're seeing this in India and others. People are really focused on this right now. So I think it's, I think you're seeing people looking and organizations looking for reliable partners, looking at ways in which they can diversify risk as they should, and for us, what we've been trying to do, because I think you’d   appreciate things like high purity nickel.

We have one of the largest, certainly going back over 100 years, suppliers of high purity nickel, like we provide over 60% of the high purity nickel into the US aerospace and defense sector just as an example. It's important that we have the resilience to continue to supply our long-standing customers there. But at the same time, you know, are looking very actively at other markets and ways in which we can build up and diversify some of our trade relationships with like-minded partners.

And that's just what we need to do for our host governments, for our countries, for our shareholders to be as resilient as possible. And I think you're seeing other companies look to do the same. I do think it's hard to forecast months or years from now how these supply chains are going to rewire. But they are definitely rewiring I think in this moment.

Theo Yameogo

Yeah. All right. Well, before we continue our discussions, I would like to pause and gather thoughts of the audience around some of these polling questions that we have throughout the sessions. So the next polling question is as follows, as the sector transforms, which challenge is your organization most focused on addressing?

Please take a moment to respond to the poll. And while responding to the poll, let's talk transformation, Shaun. So Vale Base Metals has made tremendous progress in this transformation since you took over and you moved from, and you move towards a more agile, decentralized, performance-driven model. How is that positioning you to capture the new opportunities, especially as demand for critical minerals accelerates?

Shaun Usmar

Yeah. Theo, it's, look I took this role on just under a year ago now, and the very idea of it was, I think the one thing that is irreplaceable is you have to have incredible mineral endowments. And if you've got knowhow, you've got the ability to access that not 20 years from now, 30 years from now, that's fine.

But we have a very immediate requirement to unlock the potential, I think, in the sector for critical minerals. So to me, if you look at Vale Base Metals, and you look at the market as a whole, I know when I started, I think we were only something like 4 of 25 institutions following Vale that were actually probably, well, making an attempt to model Vale Base Metals.

That's now seven. So I think it's a hugely underappreciated set of opportunities that this business represents, not just for Vale, and for Manara, our other shareholder, but indeed, I think for the sector. So the focus here is we've got great mineral endowments in some ways spanning more than a century when you look at camps like Sudbury. We also have in the Amazon, you know, copper endowments in a world that is very hungry for copper, but needs to unlock their potential.

And so for us, what we've done coming in is saying okay where is our starting point. We know we have the endowment, but the endowment is not achieving its potential because of gaps and opportunities. And I'd say, firstly, an overly burdensome operating model and organizational model from an overhead perspective. It's very important for us to reconnect with the business of being a business.

It's important for each of our assets to see themselves with the right incentives to understand that here we are to grow a cash flow, to allocate capital well, and to have a robust portfolio that can withstand, you know, the economic cycles and, ultimately, that we are, we always, in mining, are ultimately serving at the pleasure of host communities and host governments.

And we have to be exceptional when it comes to our social license. And so that's been a large part of the idea with the business. In a fairly short period of time, we've initiated the biggest restructure in the history of this business.

Late last year, we've taken out, I'd say approaching now 40% of our global overhead, the run rate at this moment on cash improvements, I can't affect price, but I can in terms of certainly cost and productivities.

Business has rallied, and it's already at about $340 million US a year. And we see a lot more opportunity to come. And what that's done is it's a lot of the operations now, who previously were very much focused on nearer-term EBITDA metrics, both in terms of incentives and others to reconnect with cash flow, capital allocation potential and the economic drivers that can maximize value to be able to see that through the reporting and the way that we actually see the business correctly.

And then going back to the analysts, we have a job to do to help them appreciate that going forward. So, we have seen a huge acceleration. I think the, during the midst of that huge restructuring, we've seen the business rally, we've seen our best, certainly safety performance in seven years. And we've seen our best first half of this year on both copper nickel production in, you know, 6 or 7 years in certainly are really well placed to continue. And as we deliver, I think what we're finding is that we're finding more and more opportunity through the drill bit, the ability to use our lower cost position to unlock previously uneconomic material and be able to bring that to the fore. So, to me, as we think about this moment and going back to some of the earlier comments, the best that we can do, I believe, for this ecosystem is really to be as productive, to optimize that portfolio, to know that we don't have to do everything ourselves, to partner with groups that perhaps can complement, and we are doing that.

And we're seeing more and more opportunity to focus our limited resources in a way that will grow value and certainly reduce risk on our ability to execute. So I think in this time, that's the best way to demonstrate resilience, is to be the best that we possibly can. And then in the future, use that as a platform, I believe, to look to grow the organization and perhaps build that truly world class critical minerals business.

Theo Yameogo

Yeah. So you mentioned, you mentioned basically all you do on the portfolio side. I think some of your peers may want to know how you approach your portfolio decisions, because, again, they, you know, the world is not as fluid as it used to be, we have tariffs and barriers that we now put in some places around the world. Yet you do have copper/nickel flowing from around the world. How do you balance those decisions? And especially when price of copper/nickel may not be up actually in tandem.

Shaun Usmar

Yeah, look, I think the first thing is the recognition ourselves that going back to basics with our existing portfolio, helping each of the assets achieve their potential is a necessary first step.

Like, how do we make sure that we've de-risked off each of our operations and help them achieve their potential? And then we're zooming out to sort of make sure that are we focusing on the right commodities in the right jurisdictions? Theo, you may remember prior to taking on this role, I built a company called Triple Flag with an incredible group of people.

But to build that portfolio, you know, we looked at over a thousand mining opportunities over an 8 to 9 year period to build out a portfolio that demonstrated a huge amount of growth. And what that means is a very clear focus on, ultimately, portfolio management and capital allocation. And I think it's a thing the mining sectors sort of struggle with over time.

So I think in this moment, going back to the earlier points you've made around just some of the shifting geopolitical sands and supply chain uncertainty. I think there's a premium on jurisdictions where you know how to operate with host governments that you can work with in a very collaborative way, because this is a repeat again. You know, I think we're seeing host governments from Canada to Brazil to certainly the United States and others,

who are really focusing in this moment on how do they take permitting timelines that have gone from saying 7 to 20 years on average, to bring on new supply and to actually make those more efficient? We've seen the Carney government and others, treat this as a national priority, and we applaud that. It's so important.

So, in this world, making sure that you have mineral endowments and operating capabilities and knowhow in places that you know how to operate and that where you can work very collaboratively with your stakeholders. I think it's an underestimated asset in this moment in time. So for us, and also that you know that you can generate a sensible return and you can compete meaningfully. I'd say in my career, you know, we all know how to do discounted cash flow models.

People get a bit lazy with, I believe, using hurdle rates. The real value is in truly understanding the scenarios and the cash flows and interrogating those very, very carefully, thinking through scenarios in a very deep way. A good high hurdle rate is never going to cleanse you from lazy work and understanding probabilities and cash flows.

And we do a ton of that. And so in our journey right now, we're, our overheads are now down to competitive levels. The assets are driving to achieve their potential. And then, we're looking at are we the right owners, because you should never fall in love with your assets. You know, they are things that maybe more value can be created for, frankly, for the ecosystem through other hands. Are you the best placed owner and operator?

So when we look, we are looking to more than double our copper over the next 8 to 10 years, particularly in Para, but also in Canada. So we'll see that go from say 350 to over 700,000 tons. And so, the reliability of being able to demonstrate that and efficiency is a real focal point for us. And working with our host governments on permitting and licensing has been a strong priority for us. And then, in Canada, you know, the polymetallic in Sudbury and Voisey’s, the guys are hitting new records on ramp ups and unlocking Long Harbour in Voisey’s Bay. Then endowments, we need to do more to help unlock it, because we know that there's a lot more there.

And bear in mind, it's nickel, but it's copper, it's cobalt, it's PGM, it’s gold. And Sudbury is no different. It's 100 plus year old camp, but we're actively investing. We'll put more money in this year and over the next two years into that camp than in any three-year period over the last 20 of Vale ownership.

So, you know, that it’s through a vertically integrated supply chain, when you get your tons out through your mining infrastructure, you dilute your fixed cost, you have greater resilience and competitiveness. You have a level of diversification through the polymetallics. And we have the ability also through operations in Japan, in, certainly in, in Wales and in Canada, to be able to supply customers in a very dynamic way, depending on what happens in this sort of shifting geopolitical climate. We are also looking at things like Thompson, where we're running a strategic review.

And this comes back to your point on risk and portfolio management. We may still be the best operator of that asset. It's got a huge endowment, but I can't, I don't want us to fall into the trap of trying to be all things to all people. Maybe the owners are better partners for us at that. And in Hu’u in Indonesia, we just won an award for that being the best discovery perhaps the last 20 years in copper/gold, 50 year, 300,000-400,000 tons per annum copper, copper asset 300,000 to 400,000 oz of gold, first quartile. But we're at the end of the pre-feasibility study. And do we have good partners or others that we can look to demonstrate value, but also help de-risk and deliver that going forward?

So those are some of the portfolio assets that we're revisiting as we help each of these camps achieve their potential. We’ll continually revisit what's the right portfolio for us. And, once we've demonstrated our track record, hopefully we've got a multiple that will also allow us to go out and be more active on the M&A front.

Theo Yameogo

That's really insightful. So we got to go to another polling question for the audience and the question is, which internal capability is most critical for enable transformation in your organization?

Take a few seconds to respond. While you’re responding to that question, Shaun, I’d like us to finish by talking about what we've seen in probably the last couple of years with governments now stepping in and understanding the value of critical minerals, actually understand the value of metals and minerals overall.

What is the advice you would give political leaders, but also, you know, socio-economic leaders on rebuilding the Americas metals and mineral story. Like making sure that there is some sort of equilibrium between the east and the west when it comes to critical minerals supply.

Shaun Usmar

I think it's, I think it is the question in this moment. I was at CERAWeek earlier this year, where it's not just about energy anymore, it's about critical minerals.

And, you know, they've correctly identified in the States, and elsewhere that this is a Sputnik moment, so to speak where in the age of artificial intelligence, you know, you need the datacenters, you need the energy, you need the critical minerals that are there. And also, from a national security point of view, you need access to the right critical minerals to build this out. I do think going back, I was reflecting on that moment, and I think a lot of the decision makers, because our sector has been forgotten, it's so small in the grander scheme of things. People have not appreciated just how atrophied I believe the ecosystem actually is. Average age of our operating base in Sudbury is in its 50s.

We have to do a better job as an industry working with government on making scholarships available, training people, not demonizing the supply chains that ultimately enable this modern world that we're in, but really embracing it and actually helping uplift it. Because, as you know, we will need all the talents that are needed socially, technically, environmentally to make the sector the best it can be for humanity.

So as I reflected on that, I do think the mindset is one where we need to work together industry and government. Firstly, help people understand that even if you as people are doing reform permitting, still a responsible in terms of indigenous engagement, environmental standards, but just diminish the bureaucratic hurdles that are needed to get to decisions, which I think all governments are doing in concert.

That is necessary, but it's not sufficient. Risk capital is an important thing. I think that government has a role to play, And you saw that with the MP Materials transaction recently where, you know, a floor has been provided. When you've got such an oversupply, no rational Western supplier or capital provider is going to dedicate capital with the expectation of a return to a massively single-source dominant oversupplied chain like that.

And yet, you know, a mechanism like that where it does actually provide a better risk reward dynamic for the producer, for capital to flow in for that to happen, and also meet the national security and supply chain need is I think the very important model for people to consider. Otherwise it's not going to happen.

In a capitalist system, people are not naturally going to volunteer to sort of get punched in the face with, with you know, putting capital into something in a sector where the barriers to entry seem to be pretty low and people are actually flooding more and more capital in and certainly supply coming out from that, which has been depressing price. So I think it's a really interesting development. And at the same time, it's a thing I mentioned actually back in February in CERAWeek is, if you think about it, people are underestimating how long it takes to explore, how long it takes to develop infrastructure, think of the Ring of Fire, how long it takes to then build a new mine.

Even if you fix permitting. These are not things that you do in one election cycle. I think, like the Chinese have done very successfully. It would be a really smart idea for, let's say, governments, like-minded governments to come together and to enable coalitions and to work together, not to raise trade barriers, but to actually help facilitate good, good coalitions.

I think the time that's needed can be facilitated through building of stockpiles, because the mine is ultimately a finite collection of minerals that has to be economically extracted. And we've seen that recently with an announcement again, first time, I think, since the Cold War, US talking about building a $500 million cobalt stockpile, for example. I think, there's more of that that just makes sense, because if there was a disruption on supply chains for whatever set of geopolitical reasons, I think that will just buy host governments time in order to marshal the capital that's needed and talent and resources to be able to explore, develop and then build. That will not happen quickly. But I think the fact that it is a focal point right now is very encouraged, encouraging.

The last thing, for me at least, is I think people need to zoom out a little bit into the future as an exercise and work backwards just to think, what is the world that we think we need? What's the gap analysis that we have, and what does it actually mean for regenerating the ecosystem from a talent point of view, exploration, providing economic and other incentives for that to occur?

And I think we're seeing signs of that. But there's more to do. And then, maybe just one last point to emphasize this on the importance of not trying to work just within national borders, but like the Chinese, they've gone where the minerals are rather trying to do it within the Chinese borders. You know, I think the US and others need to look very carefully other than just stimulating global or domestic demand.

You know, our business, going back to nickel, I mentioned we provide over 60% of the high purity nickel in aerospace and defense in the US. We supplied 95% of all the high purity nickel in World War II, for example, to all the allies. And so, there’s a long standing, multi-generational, very reliable source of supply and a relationship that has been developed over generations.

And so, you know, if you think, I think of their critical minerals list and you look at things like graphite, you look at some of the rare earth metals and so on, you know, they really are dependent as of most of our governments on external sources. But if I think back to, say, Brazil, a place we were active in, Brazil has in terms of things like graphite and others, nearly a quarter of the world's reserves.

But they are only  producing like I think it's something like 0.01% currently of that supply. There's huge opportunity going back if we can de-risk things, you de-risk by, certainly improving the reliability of permitting, because if you don't know how long it takes to permit, that just adds risk to investors. And the inability to secure the funding that's needed.

If you can put innovative processes in place in certain sectors, like we saw with MP Materials, things that will improve risk/reward and actually help bring private and public money together in order to unlock some of this potential. And in the same time, in a world where we keep hearing about unemployment increasing in the age of AI and highly qualified 22 year olds trying to find jobs, well - we've got an industry that can create so much opportunity for them.

We have a need for great talent. We have an ability to be able to create jobs in remote communities, as well as in urban centers. I just think, there's so much opportunity in this minute, but it is going to require a lot of combined effort, not just on behalf of one government or one group, but on a far more ambitious level and a far more global level.

Theo Yameogo

Yeah, that's very insightful, Shaun. Thanks for the great conversation.

Shaun Usmar

Yeah. Thank you. It's great seeing you again.

Kaki Giauque

Thank you for truly insightful conversation, Theo and Shaun.

And now we're turning to a topic that's front and center for many of us. COP30, decarbonization and sustainability. This panel will be moderated by Elanne Almeida, EY Brazil Sustainability Leader. Elanne, over to you.