Glencore plans to sell its stake in a nickel mine and processing plant on the islands of New Caledonia after sharp fall in prices.
The world’s leading commodities trader will seek to sell its 49% stake in Koniambo Nickel, according to a KNS statement. The company would begin “without delay” to suspend operations at its ferronickel plant while a new investor is found.
It is the latest victim of the drop in nickel prices, caused by the flood of new supplies from Indonesia. The country’s production boom has already forced several mines in Australia to close, 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, long beset by technical setbacks, high costs and social unrest. Paris has offered an energy price cut of about 200 million euros ($216 million) a year, Bloomberg reported last month.
“For more than ten years, Glencore has been the main financier of KNS without ever making a profit”Glencore stated in another statement. “Even with the aid proposed by the French government, high operating costs and current very weak nickel market conditions mean that KNS remains an unprofitable operation.”
Glencore declared last year that it would stop financing Koniambo at the end of February. The company intended to remain a shareholder, but had proposed closing the industrial plant and dedicating itself to the export of nickel ore, Bloomberg reported last month.
Doing so would be controversial because of the local jobs that would be lost. Besides, It would tighten Asia’s control over the nickel supply chain, following the huge expansion of processing capacity in China and Indonesia.
The plant will remain 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.
Rival commodities trader Trafigura Group and France’s Eramet also own stakes in New Caledonian nickel mines and plants, which face similar liquidity problems. Paris has asked Trafigura to provide more capital to Prony Resources Nouvelle-Caledonie, in which it has a 19% stake.
But the Swiss company refused, forcing Prony to look for a new investor. France is preparing a bridge loan for the company, owner of the Goro mine and a processing plant on the islands.