Sumitomo Metal Mining (SMM) has withdrawn its nickel exploration in Solomon Islands because of slumping nickel prices and the loss of a legal dispute over mining rights.
The Japanese miner started its acquisition of prospecting licences and has been exploring nickel in Isabel and Choiseul province since 2005 but got caught up in a six-year legal battle with Australia’s Axiom Mining.
The legal battle ended in March with neither SMMS nor Axiom being granted the rights over the International Tender Areas.
In a statement SMMS said during this time, the nickel price tumbled and there is market forecast predicting continued harsh market condition into the future and the business circumstances of the Solomon Islands Exploration Project changed significantly.
“As the result of our comprehensive review of such business circumstances, the final judgment in the legal proceedings and other factors SMMS concluded that it is difficult for SMMS to implement the project SMMS had sought to realize by integrating SMMS own Area with the ITA.
“As such SMMS’ will withdraw from all of its pending applications from mining leases regarding SMMS’ Own Area and SMMS will cease operation of the company except for those remaining matters arising from the withdrawal,” the statement said.
"We will pull out from all of the pending applications for mining leases," a company spokesman said, adding the withdrawal will be completed by the end of December.
The spokesperson declined to disclose its exploration costs and the cost of the legal battle, but said the exit will have a minor impact on its earnings for the current financial year to March 2018.
"During the legal proceedings, nickel prices have plunged. But even if the market picks up, it would be difficult to conduct the project as the social and legal system has not been developed in the Solomon Islands," the spokesman said.
Sumitomo Metal said it aims to increase its nickel output from its mine holdings to 150,000 tonnes a year in 2021 from the current 100,000 tonnes.
"We'll continue to seek new nickel assets through projects in the Philippines and Indonesia, among others," he said.
Photo supplied. Caption: Mining site in Isabel Province