Swiss mining company Glencore and its joint venture partner Société Minière du Sud Pacifique (SMSP) have decided to move the Koniambo Nickel operation (KNS) into care and maintenance.
KNS is a large mine located in the north of New Caledonia in the North Province.
The project company is responsible for the construction, ramp-up and operation of the 60,000tpa Northern metallurgical plant and the mining on the Koniambo massif.
The Swiss mining company will fund the operation, under a previously agreed budget, as the company begins the process of orderly transition into the state of care and maintenance.
The furnaces will remain hot for six months, and the KNS team will support the important activities necessary to maintain the integrity of the asset and keep the site secure.
Glencore said that all local KNS employees will be retained for six months and is planning to initiate a process to identify a potential new industrial partner for KNS.
The JV decision follows several months of discussions and negotiations with the relevant government and other key stakeholders.
Despite potential help from the French government, high operating costs and current volatile conditions in the nickel market made the KNS operation unprofitable.
The Swiss mining company has been supervising the KNS since acquiring the operation as part of the Xstrata transaction in 2013.
The company has been the primary funder of KNS for over ten years. It has funded more than $4bn since 2013, and a total of $9bn since project inception.
Glencore in its statement said: “KNS has contributed around $5.6bn in economic benefits to New Caledonia since 2012 from construction ($1.7bn) and operations ($3.9bn), including $3bn spent on goods and services and the payment of $950m 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.”
