Glencore has stopped its Koniambo Nickel project in New Caledonia after investing $4 billion since 2013 without making a profit.
The FTSE-100 miner and commodities dealer said that it would cease operations on the South Pacific island group located between Australia and Fiji as it sought a buyer for the 49 percent stake in the venture.
Glencore inherited a stake in the largest nickel operation in the world ten years ago when it acquired Xstrata for $30 billion. Since then, the French government has controlled the territory and is running the company on behalf of Societe Miniere du Sud Pacifique. The project has received $9 billion in investment since its conception.
Elysee Palace considers a multi-billion euro package to save mining operations in the area, but Glencore stated that “despite the French government’s proposal, high operating costs, and the current very weak nickel markets, mean Koniambo is an unprofitable business”.
The company stated that it “cannot continue to fund losses at the expense of its shareholders”.
Koniambo’s furnaces will remain in operation for another six months while being maintained by local workers until a new investor is secured.Around 1,300 people work at the site.
The London Stock Exchange saw shares of Glencore rise 9 1/4p or 2.4% to 394 1/4p.
Citi analysts said that the decision of the miner was unlikely to cause any significant impairments in the full-year results it will report next week as the company had already written down the value.
The price of nickel has significantly decreased by almost 50% since January 2023. It is currently much lower than the peak price that occurred after Russia invaded Ukraine.The price of nickel has dropped by nearly half since January 2023, and is now well below its high following Russia’s invasion in Ukraine.
This comes as a result of huge Chinese investments in Indonesian smelters whose output accounts for around half the world’s production, and a general decline in expectations for electric battery industries.
BHP, world’s largest listed miner has written off the value of a number of its Australian Nickel mines. Meanwhile, a string smaller operators were forced to close. Trafigura, Eramet and other nickel producers in New Caledonia are also facing similar pressures.