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Sumitomo Funds Exit From Loss-Making Nickel Project
8 Jun
Summary
- Sumitomo Corp provided financing for buyers of its 54% stake.
- The company booked $2.5 billion in cumulative losses over two decades.
- Production was suspended in February due to cyclone damage.
Sumitomo Corp is financing the buyers of its 54% stake in the Ambatovy nickel project in Madagascar, as it seeks to exit the loss-making venture. The Japanese trading house has invested $3 billion over twenty years, accumulating $2.5 billion in losses.
This financing arrangement, resembling vendor financing, was crucial for Sumitomo to offload the problematic asset. The funds will partly cover repairs to facilities damaged by cyclones, which have halted production since February. Production is anticipated to resume by the end of June.
Jason Kluk, a former Glencore nickel trader, and South Africa's Zungu Investments are acquiring the stake, with the deal expected to close by September. Turning Ambatovy profitable will be a significant challenge, given Sumitomo's past struggles with production stability and margins.
Adding to these pressures, a recent surge in sulphur prices has increased input costs. Ambatovy produced 28,000 metric tons of nickel and approximately 2,500 tons of cobalt in 2024. Korea Mine Rehabilitation and Mineral Resources Corporation holds the remaining 46% stake.
