Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Japanese trading house Sumitomo Corp said on Thursday it was slowly resuming production at the Ambatovy nickel and cobalt project in Madagascar after last month’s pipeline issue and is reviewing future output volumes.
Sumitomo has been struggling to stabilize production and improve profitability at the Ambatovy project, which launched in 2005.
“Our priority for the Ambatovy is to normalize production by addressing operational issues,” chief executive Shingo Ueno told a news conference.
“After that, we’ll consider all options to determine the best course, as we’ve stated before,” he added, noting that options include retaining the project or selling a stake to another company and let them be the operator.
The project produced about 10,000 metric tons of nickel in April-September, or a half of the volume in the same period a year ago, the company said, without providing an annual output forecast.
It had earlier expected annual nickel production at Ambatovy of 35,000 tons for the year to next March.
Sumitomo owns a 54.2% stake in the project companies – Ambatovy Minerals, a mining company, and Dynatec Madagascar, a refining company – with the remaining stake held by Korea Mine Rehabilitation and Mineral Resources.
For the year that ended March 31, Sumitomo wrote down Ambatovy’s book value to zero, incurring an impairment loss of 89 billion yen ($583.72 million).
Asked about potential further losses on the project, Ueno said additional funding may be necessary to sustain operations, which could lead to an impairment if deemed unrecoverable.
Sumitomo posted a net profit of 254 billion yen for the six months to September, down 11% from a year earlier, partially hit by weak coal prices.
The company maintained its net profit forecast for the fiscal year to March 2025 unchanged at 530 billion yen.
($1 = 152.4700 yen)
(By Katya Golubkova and Yuka Obayashi; Editing by Clarence Fernandez and Lincoln Feast)
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