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Glencore plans to suspend production and sell its stake in Koniambo nickel operations in New Caledonia after a sharp drop in the price of the metal, a component of stainless steel and electric car batteries.
The Swiss mining house said on Monday it would seek a new industrial partner for the mine and nickel processing plant in the French territory as it closes operations with plans for a quick reopening if new financial backing is found.
The decision is a blow to the French government's attempt to craft a rescue package for New Caledonia's nickel industry, a major generator of jobs in the South Pacific territory that accounts for 7 percent of its economic output.
The territory's high-cost operations have been hit by a rush of supply from Indonesia, the world's top producer of industrial metal.
Glencore, which owns 49 percent of Koniambo Nickel SAS (KNS), said high operating costs and weak market conditions made operations unprofitable, even taking into account proposed assistance from the French government.
“Glencore appreciates the efforts of the French government to revitalize and rescue the nickel industry in New Caledonia,” he said. “However, even with the proposed assistance, KNS remains an unsustainable operation and Glencore cannot justify continuing to finance losses to the detriment of its shareholders.”
Benchmark nickel prices have plunged 46 percent since the start of 2023 to around $16,000 per tonne due to a surge in supply from Indonesia, making mines in New Caledonia, Australia and other regions around the world are not profitable.
The French government said it had offered 200 million euros in state aid for KNS, including 60 million euros in subsidies for high energy prices and a 100 million euro loan, but had also asked the mine's shareholders to do more.
“It is now up to the shareholders to assume their responsibilities,” Economy Minister Bruno Le Maire told French lawmakers in early February.
France was now “fully committed” to trying to help KNS find a new investor, a French Economy Ministry official said on Monday.
They added, however, that the site needed to develop the means to become more profitable and that the French state could not replace industrial players. “The industry is strategic for New Caledonia and could play a role in the future for strategic supplies from Europe,” the official said.
Paris is trying to persuade local politicians to sign a “nickel pact” that would include relaxing a number of local quotas and restrictions around the export of raw nickel ore and transforming a smaller amount into a finished product on site. , which he says would help profitability. The French state has said it would also spend on improving energy infrastructure.
Rival commodities trader Trafigura and French mining group Eramet, which has stakes in nickel mines and processing facilities in New Caledonia, face similar challenges to Glencore as their operations are bleeding cash.
Glencore, which has never made a profit despite investing more than $4 billion in KNS since 2013, will retain its employees for six months, during which time the nickel plant's furnaces will remain hot so they can return to operation. quickly. In total, about 1,300 people work there.