Sherritt, Sumitomo take $1.7 bln hit on Madagascar nickel mine

Wed Jan 13, 2016 2:40am EST
 
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TOKYO Jan 13 (Reuters) - Canada's Sherritt International Corp and Japan's Sumitomo Corp said on Wednesday they would book more than $1.7 billion of losses on their Ambatovy nickel mine in Madagascar, as prices at 12-year lows wreak havoc among miners.

The companies had been ramping up production at the 60,000 tonne a year nickel mine, but the prolonged slump in commodities is taking an ever greater toll on miners and traders, forcing losses, asset sales and writedowns, with no end in sight as the new year starts.

Sumitomo said it would take a writedown of 77 billion yen ($652 million) and withdrew its earnings forecast for the year through March 2016. It blamed the price declines in nickel for the writeoff on the Ambatovy mine, in which it has a 32.5 percent stake.

"There is a possibility that we may post impairment losses in additional projects," Sumitomo said in a release.

Sherritt said it was recording an impairment expense of about C$1.6 billion ($1.12 billion) based on its 40 percent share of Ambatovy. The Toronto-based company said total losses at the mine amounted to about $2.4 billion.

Weak demand from the stainless steel sector, the dominant source of demand for nickel, and a glut in supply have hammered prices for the metal, which fell to their lowest in more than 12 years on Tuesday.

Korea Resources Corp owns a 27.5 percent stake in Ambatovy, which also produces cobalt and is the biggest capital project in Madagascar's history. ($1 = 118.1200 yen) ($1 = 1.4255 Canadian dollars) (Reporting by Aaron Sheldrick; Editing by Joseph Radford)