Glencore to sell stake in lossmaking New Caledonia nickel operations

Glencore plans to suspend production and sell its stake in the Koniambo nickel operations in New Caledonia after a sharp slump in price for the metal, a component of stainless steel and electric car batteries.

The Swiss mining house said on Monday it would look for a new industrial partner for the nickel mine and processing plant in the French territory as it closes operations with plans for a quick reopening if a new financial backer is found.

The decision is a blow to the French government’s bid to put together a rescue package for New Caledonia’s nickel industry, a big driver of jobs in the south Pacific territory accounting for 7 per cent of its economic output.

The territory’s high cost operations have been hit by a flood of supply from Indonesia, the world’s number one producer of the industrial metal.

Glencore, which owns 49 per cent of Koniambo Nickel SAS (KNS), said high operating costs and weak market conditions made operations unprofitable, even factoring in the French government’s proposed assistance.

“Glencore is appreciative of the French government’s efforts to revitalise and rescue the nickel industry in New Caledonia,” it said. “However, even with the proposed assistance, KNS remains an unsustainable operation and Glencore cannot justify continuing to fund losses to the detriment of its shareholders.”

Benchmark nickel prices have crashed 46 per cent since the start of 2023 to about $16,000 per tonne off the back of a surge in Indonesian supply, making mines in New Caledonia, Australia and other regions of the world unprofitable.

The French government said it had offered €200mn in state help for KNS, including €60mn in subsidies for high energy prices and a €100mn loan, but had also called on shareholders in the mine to do more.

“Now it’s up to shareholders to take their responsibilities,” economy minister Bruno Le Maire told French lawmakers in early February.

France was now “totally engaged” in trying to help KNS find a new investor, an official at the French economy ministry said on Monday.

They added, however, that the site needed to develop the means of becoming more profitable, and that the French state could not replace the industrial players. “The industry is strategic for New Caledonia and could play a role in future for Europe’s strategic supplies,” the official said.

Paris is trying to persuade local politicians to sign a “nickel pact” that would include relaxing a series of quotas and local restrictions around exporting raw nickel ore and transforming less of it into a finished product on site, which it says would help profitability. The French state has said it would also spend on improving energy infrastructure.

Rival commodity trader Trafigura and French mining group Eramet, which hold stakes in nickel mines and processing facilities in New Caledonia, are facing similar challenges to Glencore as their operations are bleeding cash.

Glencore, which has never made a profit despite putting more than $4bn into KNS since 2013, will retain employees for six months during which time furnaces at the nickel plant will remain hot so they can return to operations quickly. There are about 1,300 people employed at the site overall.