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Mining and trading giant Glencore is to stop financing a lossmaking nickel mine in New Caledonia, as growing Indonesian production of a key metal in electric car batteries squeezes rivals.
Closure of the mine would be a blow to the French territory’s economy — mining accounts for 6 per cent of its GDP — and further concentrate global nickel production in Indonesia, where the supply chain is largely controlled by Chinese companies.
Glencore said on Wednesday that it plans to stop financing the Koniambo nickel mine at the end of February. It added that it had invested $9bn in the project, which is called KNS, since its beginning.
“KNS continues to struggle financially and incur significant losses largely due to factors outside of its control relating to cost structures and market conditions,” it said.
“Glencore will work with KNS and relevant stakeholders to explore solutions for KNS’ ongoing losses, including looking for alternative sources of funding,” it added.
Glencore, which owns a 49 per cent stake in Koniambo with the remainder held by Société Minière du Sud Pacifique, a company majority owned by the island’s North Province, has flagged for years that the asset is unprofitable.
The five-month countdown to find new financing increases the pressure on New Caledonia’s nickel industry, which the French government has recognised as strategically important for the economy of the island and the electric vehicle battery industry.
Nickel has been designated a strategic raw material by the EU, which has outlined policies to boost production and processing of minerals in the bloc and diversify sources of supply.
Indonesia has become a powerhouse in nickel production, generating about half of global supply last year. The surge in output has put downward pressure on nickel prices, which have fallen almost 40 per cent since the start of the year to $18,500 a tonne.
Koniambo’s problems highlight that surging Indonesian nickel supply is undermining the viability of projects elsewhere and making it harder for the west to diversify supply and compete with China in securing strategic resources.
In July, the French government published a report saying that New Caledonia could be an “asset” for Europe and supply 85 per cent of nickel for planned French battery plants by 2030, but that the territory’s three operators are plagued by production problems and high costs.
It added that despite subsidies totalling nearly €700mn, the three operations — which include the Trafigura-backed Goro mine — could face closure unless private and public financing is provided.
The report set out proposals to overhaul the three companies including rationalising the territory’s shareholdings in a single agency.
The three operators produced about 90,000 tonnes of nickel in 2022, the report said.
Glencore reported $20bn of earnings in 2022 largely driven by bumper coal profits. Koniambo contributed $350mn of pre-tax losses to the company in the previous two financial years and has been lossmaking since it started production in 2014.