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First Quantum Minerals struggles amidst weak nickel prices: Ravensthorpe operation suspended

Weak nickel prices might have been why Canadian miner, First Quantum Minerals is suspending mining at its Ravensthorpe nickel operation on Western Australia’s south coast, but that is just an additional headache for a company now struggling to stay afloat after losing a massive $US10 billion copper mine in Panama last year and seeing its share price collapse.

In a statement on Monday, First Quantum said weak world nickel prices had brought about the decision which is the second involving a nickel miner in a week after the administrators of Panoramic Resources decided to stop mining at the company’s Savannah nickel, copper and cobalt mine in WA’s Kimberley region.

First Quantum owns 70% of Ravensthorpe after selling 30% of the operation to South Korean steel giant, POSCO for $US240 million back in 2021.

Nickel prices fell 50% last year thanks to rising oversupply from Indonesia where Chinese controlled companies are turning the country’s poor grade lateritic nickel into low grade metal and then shipping it to China for further processing.

First Quantum Minerals said it will continue to produce nickel from ore stockpiles, and the suspension of mining will ensure Ravensthorpe remains viable in the long-term. It’s the 4th closure of the mine in 17 years.
The stockpiles are anticipated to take the next 18 months to two years to process before mining resumes at the main Hale Bopp and Halleys ore bodies at Ravensthorpe.

It is expected that 125 workers will lose their jobs, a third of the 420 workforce.

The mine is a marginal operation at best – BHP spent more than $US3 billion on it and closed it in 2007 and sold it to First Quantum for $US340 million in 2010. It closed again in 2017 because of low prices and restarted it two years later and then sold a stake to POSCO.

Ravensthorpe though is not like BHP’s Nickel West mines in that it is a lateritic ore body which requires processing in a very different way to the sulphide based nickel orebodies bHP mines (and companies like IGO). Sulphide ores are cheaper to mine and process than lateritic based ores.

The decision by the Canadian company will raise speculation about that Glencore might follow suit and suspend operations at its Murrin Murrin lateritic nickel and cobalt mine in WA.

First Quantum though has more serious problems – it is struggling to survive after the Panama government and protestors forced the company to suspend operations at its $US10 billion Cobre Panama copper mine, one of the largest in the world and one of the newest.

The move saw the company’s shares fall heavily, shedding 66% of its value in the past six months as it has been left struggling to surprise with weak global metal prices, especially for nickel and cobalt, have added to its pain.

While the shares are up more than 21% so far in 2024 which has pushed its market value rise to $C9.1 billion, that’s only a third of the value midway through last year.

Cobre Panama lost its licence in a court action late last year after months of protests and government opposition to the huge mine which is supposed to produce more than 440,000 tonnes of copper metal a year from an series of deposits in Panama

First Quantum’s biggest shareholder is China’s major copper group, Jiangxi Copper Company.

Up to the loss of its huge Cobre Panama copper mine late last year, First Quantum employed around 20,000 people worldwide – 7,000 employees and contract workers have lost their jobs in Panama as a result loss of the mine which remains closed
In the wake of the decision to suspend mining and pit it on care and maintenance, Reuters reported that that Chinese state-owned Jiangxi Copper Corporation has already approached First Quantum on the matter, but that no agreement has been reached so far.

The media reports said Jiangxi was evaluating the acquisition of one of the two mines or a stake in one of them.

The Vancouver-based miner is the sole owner of the Sentinel copper mine and has a 80% stake in the Kansanshi mine, both in Zambia.

First Quantum’s presence in Zambia, Africa’s second-largest copper producer, also includes the Fishtie copper project, near the border with the Democratic Republic of Congo.

It has already committed $2US billion to the development of the Lumwana super pit expansion in Zambia, and has a stake in the huge Reko Diq copper project in Pakistan (with Barrick which is expected to be one of world’s 10 largest when it reaches production later this decade or in the early 2030s.

Barrick Gold was reported to be sniffing around First Quantum in December after the loss of the Cobre Panama mine.

First Quantum said it plans to provide an update on the company’s plan to meet its debt obligations by the end of January. Suspending operations at Ravensthorpe was just part of the company battening down the hatches and trying to survive this enormous financial shock.