Glencore to sell its unprofitable nickel processing stake
Glencore says it is to sell its stake in Koniambo Nickel SAS (KNS) in New Caledonia and production at its processing plant will be in care and maintenance for six months while a new investor is sought for the unprofitable business.
France has been negotiating to save New Caledonia’s nickel industry. Paris said last week it had offered KNS state support worth about €200m.
“Even with the French government’s proposed assistance, high operating costs and current very weak nickel market conditions mean KNS remains an unprofitable operation,” Glencore said in a statement on Monday. “Glencore will shortly initiate a process to identify a potential new industrial partner for KNS,” it said.
The French government took note of Glencore’s decision and would maintain its offer of state aid for KNS, a finance ministry official told reporters.
The government’s position remained that an industrial player and not the state should invest in KNS and New Caledonia’s other nickel processors, the official said. Paris was not excluding at this stage the possibility of a Chinese investor.
Commodities miner and trader Glencore said in 2023 that it would only finance KNS, in which it had a 49% stake, until the end of February after pouring billions into the operation.
Glencore said in its statement that it would fund KNS during the six months when the company’s plant would be placed in “care and maintenance”.
The plant’s furnaces would remain hot to maintain the viability of the site and all local KNS employees would be retained, it said.
The move to halt production should enable Glencore to avoid a negative effect on core earnings of up to $400m, with a full annual saving likely from 2025, Citi analysts said.
KNS is a joint venture between Glencore and Societe Miniere du Sud Pacifique, the latter controlled by New Caledonia’s northern province.
High costs and political tension in New Caledonia, coupled with competition from Indonesia, have left the French territory’s three processing plants on the verge of collapse.
The other two nickel processors are SLN, in which French miner Eramet has a majority stake, and Prony Resources, in which commodity merchant Trafigura has a minority stake.
The government aimed to reach an agreement in coming weeks on New Caledonia’s nickel sector, the official said, declining to comment on terms discussed with SLN and Prony Resources.