Glencore to Sell Stake in Nickel Mine Amid Price Rout — 2nd Update

By Christian Moess Laursen

Glencore is looking for a buyer for its stake in the Koniambo Nickel joint-venture given continued losses amid slumping nickel prices, after investing billions in the project over the past decade.

The Anglo-Swiss mining giant said Monday that it will transition New Caledonia-based Koniambo Nickel--or KNS--to care and maintenance status and plans a six-months winding-down period.

Glencore will begin the search for a new industrial partner for the venture shortly, in which it has a 49% stake. In September, the miner said it would stop 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," the diversified miner said.

The decision echoes that of peer Trafigura last month, when the company said it would stop funding for a major nickel operation, also in New Caledonia. The French territory in the South Pacific was once seen as the future of nickel production.

Just 18 months ago the nickel market was running hot and Australian giant BHP struck a deal with Tesla to supply it with the key element for electric vehicles. However, a flood of new supply from Indonesia has sent prices crashing.

Prices are down 42% over the last twelve months.

The drop has been harsh on the industry, spurring a raft of mine closures and production halts.

Last month, private-owned Wyloo Metals said it was shutting down its nickel mines in Western Australia. A week prior, BHP warned that it might have to write down the value of a flagship nickel project to mitigate the impacts of the nickel price slump. Likewise, Canada's First Quantum Minerals significantly cut production at its Ravensthorpe mine in Australia, resulting in a 30% reduction in the operation's workforce.

However, despite the supply cuts, prices are expected to keep falling, Wood Mackenzie said in a recent report. HSBC analysts anticipate nickel to remain in surplus over the medium term, they said in a note from January.

For more than ten years, Glencore has been the primary funder of KNS without ever realizing a profit. It has invested more than $4 billion since 2013, when it bought the operation as part of the Xstrata merger.

Koniambo produced around 27,000 metric tons nickel in 2023, and the halt should therefore have only a marginal impacting on the nickel market, Citi analysts write in a research note.

Societe Miniere du Sud Pacifique holds the remaining 51% in KNS.

Write to Christian Moess Laursen at christian.moess@wsj.com

(END) Dow Jones Newswires

February 12, 2024 06:35 ET (11:35 GMT)

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