Koniambo Nickel to transition to care and maintenance
The shareholders of Koniambo Nickel SAS (KNS) – a joint venture between Société Minière du Sud Pacifique SA (SMSP) and Glencore plc – have made the decision to transition KNS into care and maintenance.
Glencore will fund the operation according to an agreed budget as it begins an orderly transition to a state of care and maintenance. The furnaces will remain hot for six months, and the KNS team will support the critical activities required to maintain the integrity of the asset and keep the site secure.
Glencore will shortly initiate a process to identify a potential new industrial partner for KNS.
All local KNS employees will be retained for a period of six months to aid in the transition.
This decision follows several months of extensive discussions and negotiations with relevant government and other key stakeholders. Even with the French government’s proposed assistance, high operating costs and current very weak nickel market conditions means KNS remains an unprofitable operation.
Glencore has been a responsible custodian of KNS since acquiring the operation as part of the Xstrata transaction in 2013. More than US$4 billion has been funded by Glencore since 2013, and a total of US$9 billion since project inception. For over ten years, Glencore has been the primary funder of KNS without ever realising a profit. KNS has contributed c.US$5.6 billion in economic benefits to New Caledonia since 2012 from construction (US$1.7 billion) and operations (US$3.9 billion), including US$3.0 billion spent on goods and services and the payment of US$950 million in local salaries.
Glencore is appreciative of the French government’s efforts to revitalize and rescue the nickel industry in New Caledonia, 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.
