Sherritt's stake in the project will now be reduced to 12% from 40% in exchange for the elimination of C$1.4bn ($1.02bn) of debt owed to Sumitomo and Kores

The three partners have reached an agreement in principle to revise the joint venture partnership structure. Sumitomo will get 15.2% of Sherritt’s stake to increase its ownership in the nickel project to 47.7%.

Sherritt International president and CEO David Pathe said: “After months of negotiation, I am pleased to be able to announce a resolution which removes the largest area of uncertainty for both Ambatovy and Sherritt.

“With this transaction, we eliminate $1.4 billion in debt from Sherritt's balance sheet, and maintain our exposure to Ambatovy with a clean 12 per cent interest and continuity as the operator.”

After the completion of the debt restructuring deal, Sherritt will remain as the project operator till at least 2024.

The Toronto-based company will carry on funding at the same level retroactively to 2015 end and on a go-forward basis.

As per the agreement, Sherritt has committed to escrow nearly $23m to meet 12% of potential future financing requirements for the Ambatovy nickel project.

The company stated that amounts in escrow not utilized for funding the project will be diverted to repay the joint venture partner loans worth $132.3m as on March 31 at maturity.

Sumitomo stated: “With the increased stability of partnership achieved by this new structure, Sumitomo Corporation will, hand in hand with its partners, firmly support Ambatovy in its endeavor to become a world leading nickel laterite project.”

The closing of the transaction between the partners will depend on certain internal and third party approvals along with the completion of binding and definitive documentation.

The Ambatovy mine site is situated 80 km east of Antananarivo, the capital of Madagascar, near the town of Moramanga. 

The ore body at the mine features two large, weathered lateritic nickel deposits located about 3km apart the aAmbatovy Deposit and the Analamay Deposit).

Combined, the deposits constitute one of the world’s biggest lateritic nickel reserves, covering nearly 1,600 ha of area , with depths ranging between 20m and 100m. 

Image: Ambatovy nickel project minesite. Photo: courtesy of Ambatovy.