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Glencore to Sell Stake in Koniambo Nickel Joint-Venture


Glencore, the Anglo-Swiss mining giant, is actively seeking a buyer for its stake in the Koniambo Nickel joint-venture. The company has suffered continued losses amid slumping nickel prices, despite investing billions in the project over the past decade.

In an announcement on Monday, Glencore revealed that it intends to transition the New Caledonia-based Koniambo Nickel (KNS) to care and maintenance status. The winding-down period is expected to last for approximately six months.

Glencore holds a 49% stake in the venture and will initiate the search for a new industrial partner soon. Back in September, the company declared its decision to cease funding by the end of February.

“Even with the proposed assistance from the French government, KNS remains an unsustainable operation, and Glencore cannot justify continuing to fund losses to the detriment of its shareholders,” stated the diversified miner.

This move from Glencore mirrors that of Trafigura, a fellow industry player, who decided last month to stop funding a major nickel operation, also located in New Caledonia. At one point, the French territory in the South Pacific was considered the future of nickel production.

Just eighteen months ago, the nickel market was lucrative, with Australian giant BHP striking a deal with Tesla to supply the key element for electric vehicles. However, an influx of new supply from Indonesia has caused prices to plummet.

Over the last twelve months, nickel prices have fallen by a staggering 42%.

Nickel Industry Faces Challenges amid Price Slump

The nickel industry has been severely affected by the ongoing drop in prices, resulting in mine closures and production halts. This downward trend has prompted significant actions from major players in the industry.

One such player, private-owned company Wyloo Metals, recently announced the shutdown of its nickel mines in Western Australia. Additionally, BHP, a leading mining company, warned of potential write-downs in the value of its flagship nickel project to mitigate the impact of the price slump.

The situation has also affected international players. Canada’s First Quantum Minerals has made significant cuts in production at its Ravensthorpe mine in Australia, leading to a 30% reduction in its workforce.

Despite these supply cuts, Wood Mackenzie, a reputable research firm, expects nickel prices to continue their decline. Another report from HSBC analysts in January indicates that nickel is likely to remain in surplus in the medium term.

An interesting note is that Glencore, a major player in the industry, has been funding KNS (Koniambo) for more than a decade without making a profit. Since acquiring the operation as part of the Xstrata merger in 2013, Glencore has invested over $4 billion into KNS.

In 2023, Koniambo produced approximately 27,000 metric tons of nickel. Citi analysts believe that the halt in operations will only have a marginal impact on the overall nickel market.

It should be noted that Societe Miniere du Sud Pacifique holds a 51% stake in KNS.

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