Russian mining giant Nornickel has agreed to pay $18 million to its partner African Rainbow Minerals (ARM) to end its involvement in the Nkomati nickel mine in South Africa. The deal, announced on Friday, will see ARM take full ownership of the mine, which has been on maintenance since 2021 due to low nickel prices.
Nornickel, the world’s top palladium producer and a major refined nickel producer, said the decision was in line with its strategy to focus on its core assets in Russia and exit non-tier-1 assets. The company acquired a 50% stake in Nkomati in 2007 as part of its $6.5 billion purchase of LionOre Mining, which also had assets in Australia and Botswana.
However, the nickel market has been volatile in recent years, with prices falling from a record high of over $50,000 per tonne in 2007 to below $10,000 in 2016. Nickel prices have recovered somewhat in 2023, reaching over $20,000 in August, but remain below the levels needed to make Nkomati profitable.
Nkomati is an open pit mine that produces about 16,000 tonnes of nickel per year. It also contains copper, cobalt, chrome and platinum group metals. The mine is nearing the end of its life, with only low-grade underground ore left to be mined. ARM said the mine’s prospects continue to be challenging due to high maintenance costs and the uncertain nickel market outlook.
ARM, a diversified miner with interests in iron ore, coal, manganese and platinum, said it will buy Nornickel’s stake for 1 million rand ($54,440) but will also take over the environmental liabilities of the mine, with a 325 million rand ($18 million) contribution from Nornickel’s subsidiary. The deal is expected to close in 2024.
The transaction marks the end of Nornickel’s presence in Africa after it sold its 85% stake in the Tati nickel mine in Botswana to BCL Group in 2015. However, that deal was also marred by disputes, as BCL went into liquidation in 2016 and failed to pay Nornickel. Nornickel is still seeking damages from BCL and the Botswana government.
Nornickel’s exit from Africa comes amid growing demand for nickel from the electric vehicle sector, which uses the metal in batteries. However, most of the demand is for nickel sulphate, a refined product that Nornickel does not produce. Nornickel mainly supplies nickel to the stainless steel industry, which accounts for about 70% of global nickel consumption.
According to the International Nickel Study Group, the global nickel market is expected to have a surplus of 143,000 tonnes in 2023, the largest in at least a decade, as supply from Indonesia and the Philippines outpaces demand. However, some analysts expect the market to tighten in the long term, as demand from the electric vehicle sector grows and supply from low-cost producers declines.
Source: Reuters
