Jakarta, CNBC Indonesia – Mining giant Glencore said it would sell its stake in Koniambo Nickel SAS (KNS) in New Caledonia and halt production at the KNS processing plant for six months while it seeks new investors for the loss-making business.

According to Reuters, France has been negotiating to save New Caledonia's nickel industry. Paris pum said last week that it had offered state support to the KNS worth around 200 million euros.

“Even with the French government's proposed assistance, high operational costs and very weak nickel market conditions currently mean KNS operations remain unprofitable,” said Glencore in a statement, last Monday, quoted on Sunday (18/2/2024).

Glencore will immediately begin the process to identify potential new industrial partners for KNS, it said. The French government took note of Glencore's decision and will maintain its offer of state aid to KNS, a finance ministry official told reporters.

The government's position remains that industry players and not the state should invest in KNS and other New Caledonian nickel processors, the official said, adding that at this stage Paris does not exclude the possibility of Chinese investors.

Miner and commodities trader Glencore said last year that it would only finance KNS, in which it holds a 49% stake, until the end of February after pouring billions of dollars into the operation.

Glencore added in Monday's statement that it would fund KNS for a six-month period during which the company's plant would be placed under “care and maintenance”.

The plant's furnaces will remain hot to maintain site continuity and all local KNS employees will be retained, he said.

The move to halt production would allow Glencore to avoid a negative impact to core earnings (EBITDA) of up to $400 million, with full annual savings likely from 2025, Citi analysts said.

KNS is a joint venture between Glencore and Societe Miniere du Sud Pacifique SA (SMSP), with the latter controlled by the northern province of New Caledonia.

High costs and political tensions in New Caledonia, coupled with competition from Indonesia, have left three processing plants in the French territory on the verge of collapse.

It is known that Indonesia is currently boosting its nickel exports through a downstream program. Data from the Central Statistics Agency (BPS) shows that nickel ore exports in 2010-2019 or 10 years averaged US$ 710.095 million with a volume of 23.28 million tons.

Meanwhile, ferro nickel exports reached US$ 789.43 million with a volume of 485,521 tons. Exports of nickel and goods therefrom reached US$ 928.57 million with a volume of 97 thousand tons.

Specifically in 2022, exports of ferro nickel reached US$ 13.621 billion or increased 424.8% compared to before the export ban in 2019. Exports of nickel and goods therefrom reached US$ 5.98 billion, an increase of 635.2% compared to before the export ban in 2019 .

Responding to this, the Minister of Energy and Mineral Resources (ESDM), Arifin Tasrif, opened his voice. The closure of nickel mines in these countries is not necessarily because of Indonesia.

“But let's see first whether we are right, not necessarily,” said Arifin at the Directorate General of Oil and Gas (Ditjen Migas) Building of the Ministry of Energy and Mineral Resources, South Jakarta.

He said that the fall in nickel prices and the collapse of mining companies had many factors. However, he appealed to industry players to carry out further downstreaming.

“There are many factors that come from this. We are giving advice to the industry to look at this trend, otherwise they will get caught out. Downstream it further, right,” he said.

[Gambas:Video CNBC]

(tps/wur)