(Bloomberg) — Glencore Plc plans to sell its stake in a nickel mine and a processing plant on the islands of New Caledonia following a dramatic slump in prices.
The world’s top commodity trader will seek to sell its 49% stake in Koniambo Nickel SAS, according to a statement from KNS. The company would begin “without delay” to suspend operations at its ferronickel plant while a new investor is found.
It’s the latest casualty of a slump in nickel prices driven by a flood of new supply from Indonesia. The country’s production boom has already forced several mines in Australia to shutter, despite growing demand for the metal from the electric vehicle sector.
The French government, which controls New Caledonia, has been weighing a bailout for the islands’ nickel industry, which has long been beset by technical mishaps, high costs and social unrest. Relief on energy prices of about 200 million euros ($216 million) a year has been offered by Paris, Bloomberg reported last month.
“For over ten years, Glencore has been the primary funder of KNS without ever realizing a profit,” Glencore said in a separate statement. “Even with the French government’s proposed assistance, high operating costs and current very weak nickel market conditions means KNS remains an unprofitable operation.”
Glencore said last year it would stop funding Koniambo by the end of February. The firm had been looking to remain a shareholder, but had proposed mothballing the industrial plant and switching to nickel ore exports instead, Bloomberg reported last month.
Doing so would be controversial because of the local jobs lost. It would also further intensify Asia’s grip on the nickel supply chain after the massive expansion of processing capacity in China and Indonesia.
The plant will be kept under care and maintenance for six months, during which its employees would continue to be paid. Glencore shares rose as much as 1.5% in early London trading.
Read More: From Green Hype to Bailouts, the Nickel Industry Has Imploded
Rival commodity trader Trafigura Group and France’s Eramet SA also own stakes in nickel mines and plants in New Caledonia, which are facing similar cash crunches. Trafigura was asked by Paris to contribute more capital to Prony Resources Nouvelle-Caledonie, in which it has a 19% stake.
But the Switzerland-headquartered firm refused, forcing Prony to seek a new investor. France is preparing a bridging loan for the company, which owns the Goro mine and a processing plant on the islands.
Similar financing is being prepared for Societe Le Nickel, which is majority owned by Eramet SA.
(Updates with context throughout.)
Share this article in your social network