LONDON, June 8 – Sumitomo Corporation provided financing to the buyers of its 54% stake in Madagascar’s Ambatovy nickel operation, helping facilitate its exit from a project that has generated significant losses over the past two decades.
According to Reuters reports, the financing arrangement was designed to support the acquisition of the stake while ensuring the continued operation of one of Africa’s largest nickel and cobalt mining projects.
The Japanese conglomerate announced in May that it would record a loss of approximately $418 million related to the transaction, adding to an estimated $2.5 billion in cumulative losses incurred since investing in the project.
Sumitomo is estimated to have invested roughly $3 billion in Ambatovy over the past twenty years.
The stake is being acquired by Jason Kluk and Zungu Investments, subject to the completion of the transaction by the end of September.
Industry sources indicated that the structure resembles vendor financing, where the seller provides funding support to the buyer to facilitate a transaction.
Sumitomo is also expected to retain certain nickel offtake rights under the arrangement, allowing it to maintain access to future production from the mine.
Production Recovery Underway
Part of the financing package is reportedly expected to support repairs to facilities damaged by cyclones earlier this year.
Operations at Ambatovy have been suspended since February following weather-related disruptions, with production expected to resume by the end of June.
The mine remains one of the world’s largest laterite nickel operations and is a significant producer of both nickel and cobalt, two minerals that play a critical role in battery manufacturing and the global energy transition.
In 2024, Ambatovy produced approximately 28,000 metric tons of nickel and around 2,500 metric tons of cobalt.
Profitability Challenges Persist
Despite its strategic importance, Ambatovy has struggled for years with operational challenges, production instability and margin pressures.
Industry observers note that turning the operation into a consistently profitable asset remains a significant challenge.
The mine has also faced additional cost pressures following a sharp rise in sulphur prices linked to disruptions in global commodity markets and supply chains.
Sulphur is a key input used in nickel processing, and higher prices have increased operating costs across the sector.
The transaction highlights the difficulties some mining companies face in balancing long-term resource opportunities with operational and financial realities, particularly in large-scale resource projects requiring substantial capital investment.
Strategic Shift
Sumitomo said the agreement is intended to ensure the sustainable operation of Ambatovy under new ownership while allowing the company to reduce its exposure to a project that has weighed heavily on earnings for years.
The remaining 46% stake in Ambatovy continues to be held by Korea Mine Rehabilitation and Mineral Resources Corporation.
The deal comes as global demand for battery minerals continues to grow, driven by increasing electric vehicle production and expanding energy storage markets, creating renewed interest in strategic nickel and cobalt assets across Africa.
