Glencore to sell stake in unprofitable nickel business

Glencore said on Monday it would sell its stake in Koniambo Nickel SAS (KNS) in New Caledonia and production at its processing plant would be halted for six months while a new investor was sought for the loss-making business.

France has been negotiating to save New Caledonia’s nickel industry and 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. “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, adding that 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.

Six-months’ funding

Glencore added in Monday’s statement that it would fund KNS during the six-month period in which 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 allow 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 SA (SMSP), 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 the coming weeks on New Caledonia’s nickel sector, the official said, declining to comment on terms discussed with SLN and Prony Resources.

Reuters