London 05/02/2016 - Sumitomo Corp has written off 111.6 billion yen ($954.5 million) because of the slump in metal prices in which LME nickel slumped to a 2003 low copper its cheapest since 2009.
The impairment loss, which includes a 77-billion-yen write-off against the Ambatovy nickel project, was reported for the nine-month period that ended on December 31.
The company, which holds 32.5 percent of the mine, has lowered its exposure to around $1.7 billion and will now pursue further cost reductions while keeping operation rates stable, it said.
It also recorded a 14 billion yen loss in its copper and molybdenum mining business, Sierra Gorda in Chile. Sumitomo Corp holds 13.5 percent of the joint venture, Sumitomo Metal Mining 31.5 percent and KGHM 55 percent.
Sumitomo has now decreased its exposure to around $0.8 billion, which includes a completion guarantee of $0.3 billion.
Sierra Gorda has been operating at a rate of 80-90 percent of nameplate throughout capacity. The mine is struggling to find a stable shipping strategy via the port of Antofagasta due to long-running environmental issues.
It is now looking to realise a stable operation at full capacity of 110,000 tonnes per day. The second phase will be to decide on its investment to expand capacity to more than 190,000 tonnes per day. This will take into account the ramp-up status of the existing plant and business environment.
Sumitomo's South African iron ore project also recorded a 18.3-billion-yen loss.
The company has lowered its forecasts for these metals to reflect the current decline in prices. Its renewed mid-to-long-term forecast for nickel is $8.5 per lb, copper to around $3 and molybdenum to around $10.
(Editing by Mark Shaw)