Nickel, cobalt: Sumitomo sets date for Ambatovy revival

Sumitomo has announced that it intends to resume operations in February 2021 at its 54% owned Ambatovy nickel-cobalt operation in Madagascar. The mine was placed on care and maintenance in March due to a national lockdown, imposed to control the spread of COVID-19.

The other stakeholder in the project is Kores (46%). Sherritt was an initial joint venture partner in the project with a 40% stake which it steadily decreased to 12% in 2017 owing to funding commitments. In August 2020, it finally reduced its stake to nil but remained the project operator pending finalisation of agreements.

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Ambatovy has had a chequered history since starting operations in 2012, and production levels have never consistently exceeded 60% of nameplate capacity. During construction, the project also experienced massive capital cost 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 the ballooning capital costs.

Most of the operational issues at the site have been at the processing plant and refinery which has struggled to handle the variability of mined ore grades and mixed mineralogy (this is an issue seen at several HPAL operations around the globe). Highlighting the mines troubling situation, Roskill Cobalt Cost Service (Extractive) analysis placed Ambatovy in the fourth quartile of the cobalt cost curve in 2019, the last year in which it was in full operation (and not further hampered by care and maintenance costs).

When operation resumes in February 2021, there will be a new operator on-site following the exit of Sherrit. So far, Sumitomo has not indicated whether it will become the mine’s operator or outsource that to a specialist contractor. However, Sumitomo has considerable expertise in running mining operations around the globe. Nickel production is budgeted at 3kt in Q1.21 and will ramp up over the year.  Reports suggests that Sumitomo is currently reviewing the mine output plan, which could result in a scaled-back operation and potentially producing a nickel intermediate (MSP) for sale to the battery market. Given the healthy outlook for the EV battery market, Roskill forecasts rising demand for battery-grade nickel intermediates and MSP is already utilised by Sumitomo Metals Mining (in which Sumitomo Corp is a shareholder) for its nickel sulphate production in Japan.

Roskill published the second update to its Nickel: Outlook to 2029, 16th Edition report in October which provides analysis of the latest developments in supply, demand, market balance and prices amid changes to the global macroeconomic climate. Click here for more information.

Roskill’s Cobalt Cost Model Service is designed to provide miners, financial institutions, governments, and other industry stakeholders with an in-depth understanding of the costs involved throughout the cobalt supply chain; for more information, click here.

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This article was written by Brian Ziswa. Please get in touch below if you wish to discuss further:

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