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| Ambatovy nickel mine plant in Madagascar, off the east coast of Africa / Courtesy of Korea Mine Rehabilitation and Mineral Resources Corporation |
By Kim Hyun-bin
POSCO International is in a dilemma over whether to sell its 4 percent stake in the Ambatovy nickel mine in Madagascar, which has been losing money for years, according to industry officials, Tuesday.
The company had initially leaned toward disposing of the stake, but appears to have changed its stance in response to the government's push for resource security amid surging prices of raw materials such as nickel.
"There were speculative reports of POSCO International selling the Ambatovy mine last year, but nothing has been confirmed officially and it is the same this time around," a POSCO International official said.
In 2006, POSCO International formed a consortium with the Korea Mine Rehabilitation and Mineral Resources Corporation (KOMIR) and STX to purchase a stake in the nickel mine. At that time, POSCO International invested 346.9 billion won to acquire a 4 percent stake.
The Ambatovy mine is one of the world's top three largest nickel mines with 150 million tons of nickel deposits.
Commercial production was expected to begin 2010, but was delayed to 2014, eight years after the consortium made its initial investment.
The delay resulted in accumulated losses of POSCO International's initial investments. As of the end of last year, if POSCO had decided to sell, it would only have been capable of retrieving 24.1 billion won for the 4 percent stake, a loss of 93 percent from the initial investment of 346.9 billion won.
However, the situation improved when the price of nickel skyrocketed following the Russian invasion of Ukraine. According to the Korea Mineral Resources Information Service (KOMIS), the price per ton of nickel based on the closing price on March 7 was $42,995, up 133 percent from the same period last year.
During the same period, the London Metal Exchange (LME) nickel inventory also plummeted to 74,238 tons, one-third of the previous level, due to supply disruptions and economic sanctions against Russia by Western countries following its invasion of Ukraine. Russia produces 10 percent of the world's nickel.
The Madagascar mine started to turn a profit for the first time last year. According to POSCO International's consolidated audit report, the mine management corporation DMSA/AMSA recorded an annual net profit of 636.1 billion won for the first time in seven years after starting commercial production. However, the cumulative losses from 2014 to 2020 amounted to 6.65 trillion won.
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