Sumitomo Corp filed a restructuring plan for the Madagascan nickel operation in a UK court.

Ambatovy is a nickel and cobalt operation located in the east of Madagascar. The plant uses hydrometallurgical processes to convert laterite ore from the Ambatovy mine into nickel and cobalt briquettes with a purity of 99.8% minimum.

Sumitomo owns a 54.2% stake in the operation’s operating companies – Ambatovy Minerals and Dynatec Madagascar. The restructuring plan is part of an effort to ensure the stable and efficient operation of the project, according to a company spokesperson. However, further details specifically relating to the restructuring were not provided. Sumitomo booked an impairment loss of 89Bn yen (US$616M) on the project value for FY ending 31 March, which reduces the project’s book value to zero. The project has led to an accumulated loss of 410Bn yen (US$2.82Bn) for Sumitomo, including total impairment loss of 265.5Bn yen (US$1.82Bn) to date, according to a company source.

As with other nickel producers around the globe, the company has been hit by low nickel prices which have stemmed from the oversupply caused by the influx of Indonesian nickel. However, Ambatovy has already endured a chequered history since starting in 2012, and production levels have never reached close to nameplate capacity. During construction, the project also experienced massive capital overruns with an initial capital cost estimate of US$3.3Bn, which ballooned to US$8.5Bn. Plant redesign and reconfiguration have been one of the fundamental causes of rising capital costs. Meanwhile, most of the operational difficulties have been at the processing plant and refinery which has struggled to handle the variability of mined ore grades and mixed mineralogy. As a result of the challenges, having initially held a 40% stake in Ambatovy, Canadian nickel and cobalt producer, Sherritt, exited the operation completely in 2020.

The project is reported to have produced about 8kt Ni during Q2 2024, which is down from 10kt Ni over the same period in 2023. Despite this, Sumitomo still anticipates annual production of 35kt Ni for the year to 31 March.