Get Free Glencore Updates
we will send you myFT Daily Digest Email summary of latest news Glencore There is news every morning.
Mining and trading giant Glencore will stop funding a loss-making nickel mine in New Caledonia as growing Indonesian output of a key metal used in electric vehicle batteries squeezes rivals.
The mine’s closure would be a blow to the French territory’s economy – mining accounts for 6% of its GDP – and would further concentrate global nickel production in Indonesia, where the supply chain is largely controlled by Chinese companies.
Glencore said on Wednesday it planned to stop financing its Koniambo nickel mine at the end of February. The company added that $9 billion has been invested in the project, which is called KNS, since its inception.
“KNS continues to be in financial difficulty and incur significant losses, primarily due to factors such as cost structures and market conditions beyond its control,” the company said.
It added: “Glencore will work with KNS and relevant stakeholders to explore solutions to KNS’s ongoing losses, including finding alternative sources of funding.”
Glencore owns 49% of Koniambo, with the remainder held by Société Minière du Sud Pacifique, which is majority-owned by the island’s northern province. Glencore has said for years that the asset was unprofitable.
The five-month countdown to finding new financing has increased pressure on New Caledonia’s nickel industry, which the French government considers strategically important to the island’s economy and electric vehicle battery industry.
Nickel has been designated a strategic raw material by the European Union, which has formulated policies to promote the production and processing of minerals in the EU and to diversify supply sources.
Indonesia has become a major nickel producer, accounting for about half of global supply last year. The surge in production has put downward pressure on nickel prices, which have fallen nearly 40% since the beginning of the year to $18,500 per ton.
Konyambo’s problems highlight how a surge in Indonesian nickel supplies is hurting the viability of projects elsewhere and making it more difficult for the West to diversify supplies and compete with China for strategic resources.
In July, the French government issued a report saying New Caledonia could become an “asset” for Europe, supplying 85% of the nickel for a planned French battery plant by 2030, but the region’s three operators were hit by production problems and high costs.
It added that despite subsidies totaling nearly 700 million euros, three mines, including the Trafigura-backed Goro mine, could face closure unless private and public financing are provided.
The report made recommendations for an overhaul of the three companies, including rationalizing the region’s shareholding in a single institution.
The report stated that these three operators produced approximately 90,000 tons of nickel in 2022.
Glencore reported a profit of US$20 billion in 2022, mainly due to huge growth in coal profits. Koniambo has generated pre-tax losses of $350 million for the company over the past two fiscal years and has been in the red since it started production in 2014.
Svlook
