Sumitomo Ambatovy Nickel-Cobalt Exit Marks Costly Retreat From Madagascar Laterite Project

Sumitomo

Sumitomo Ambatovy nickel-cobalt exit marks a major strategic retreat from one of the world’s largest laterite nickel operations. The Japanese trading and mining group will divest its 54.17% stake in Madagascar’s Ambatovy project to Ambatovy Mineral Resources Investment.

The Sumitomo Ambatovy nickel-cobalt exit is unusually costly. The transaction value is negative $418mn, meaning Sumitomo will pay to leave the asset after more than two decades of involvement.

The Sumitomo Ambatovy nickel-cobalt exit reflects years of operational instability, high costs and weak profitability. Sumitomo joined Ambatovy in 2005 and invested around $3bn, but the project generated cumulative losses of about ¥400bn.

The sale is expected to close in the first half of Sumitomo’s financial year ending 31 March 2027. Korea Mine Rehabilitation and Mineral Resources will retain its 45.82% stake.

Operational Instability Undermines a Strategic Nickel Asset

Ambatovy remains strategically important because it produces refined nickel and cobalt. These materials serve stainless steel, battery raw materials, superalloys and industrial supply chains.

However, the project has struggled to operate consistently. Ambatovy combines laterite mining, slurry transport and refining, making it a complex integrated operation with high technical and maintenance demands.

The project was suspended in February before Cyclone Gezani struck eastern Madagascar. It has not yet fully restarted, although market participants expect operations to resume during the current quarter.

Recovery efforts are still continuing. The project has also faced slurry pipeline damage and other processing issues in previous years, which affected output and reliability.

Ambatovy produced about 30,000t of refined nickel in 2025. Cobalt output was estimated at roughly 10% of nickel production.

That production profile gives the asset continuing supply-chain relevance. But strategic metal exposure alone cannot offset weak operating economics if reliability, costs and weather-related risks remain unresolved.

New Ownership Faces Production Reliability Test

AMRI, the buyer, is a UK-based consortium led by mining investment firm Essenwood and South African private equity firm Zungu Investments. The transaction gives the new group control of Sumitomo’s stake in a difficult but potentially valuable nickel-cobalt platform.

For Sumitomo, the divestment removes a long-running drag on earnings. The company expects to record a loss of about ¥70bn in its consolidated April-June results and a non-consolidated loss of about ¥85bn for the full financial year.

Sumitomo said tax effects should limit the net consolidated impact, and the transfer has already been included in its full-year earnings forecast.

For the nickel market, the key issue is not ownership alone. The immediate question is whether the new structure can stabilise output, repair operating weaknesses and restore confidence in Ambatovy’s supply.

Madagascar nickel-cobalt supply remains strategically relevant as buyers look beyond Indonesia-dominated nickel growth. But Ambatovy must prove that it can deliver refined nickel and cobalt reliably before it can regain stronger market importance.

The sale also highlights a broader industry lesson. Large laterite nickel projects can offer scale and battery-metal exposure, but they often carry high capital intensity, technical risk and sensitivity to market cycles.

The Metalnomist Commentary

Sumitomo’s exit shows that nickel-cobalt scale is not enough when operating reliability and cost control fail. Ambatovy’s next phase will depend on whether new owners can turn a strategically valuable asset into a commercially stable supplier.