Sumitomo Corp provided financing to the buyers of its 54% stake in Madagascar’s Ambatovy nickel operation, smoothing its exit from the loss-making project, three sources familiar with the matter told Reuters.
The Japanese trading house, which has invested $3 billion in Ambatovy over two decades and booked $2.5 billion in cumulative losses, said on May 1 it would take a $418 million hit from the deal.
Sumitomo funded the transaction while retaining certain nickel offtake rights because “it needed someone to take the problem off their hands,” one source said.
Turnaround challenges
Some of the money will be used to repair cyclone damage to Ambatovy’s facilities, the source said. Production has been suspended since February and is due to resume by end-June.
The sources did not provide other details of the funding.
The 54% stake is being acquired by Jason Kluk, a former head of nickel trading at Glencore, and South Africa’s Zungu Investments subject to the deal closing by end-September.
Korea Mine Rehabilitation and Mineral Resources Corporation owns the remaining 46% stake.
Sumitomo declined to comment on any financing arrangements, but said the deal aims to ensure “the continued and sustainable operation of Ambatovy under new ownership”.
It said the $418 million hit reflected “a comprehensive economic assessment of the transaction”.
Kluk and Zungu Investments did not respond to requests for comment.
The deal structure resembles vendor financing, where a seller provides funding to a buyer, a second source said.
Turning Ambatovy profitable will be challenging, the source added, noting Sumitomo struggled for years to stabilise production and improve margins despite its resources.
A surge in sulphur prices since the start of the Iran war three months ago has added pressure on margins by raising input costs. Ambatovy produced 28,000 metric tons of nickel and roughly 2,500 tons of cobalt in 2024.
(By Polina Devitt and Pratima Desai; Editing by Mark Potter)
