The Story in 30 Seconds
Sumitomo Corporation, one of Japan’s largest trading companies, has exited the Ambatovy nickel mine in Madagascar after 20 years and $3 billion in investment. The exit was not a sale — Sumitomo paid $418 million to transfer its 54.17% controlling stake to a new consortium, absorbing the cost to close out a project that had generated approximately $2.7 billion in cumulative losses. The new owners are a Jersey-registered group led by Jason Kluk, a former Glencore nickel executive, and South African investor Sandile Zungu. Sumitomo’s share price hit a record high the day the exit was announced — the market was relieved to see the loss generator gone. For Africa’s mining sector, the story raises a harder question: what exactly broke, and is it fixed?
What Is Actually Happening
Ambatovy is a large-scale nickel and cobalt laterite mine in eastern Madagascar, one of the largest of its type in the world. It began construction in the mid-2000s with Sumitomo as the lead investor and operator, alongside partners including Sherritt International. The project was conceived during a period of high commodity prices and strong Chinese demand for nickel — the metal used in stainless steel and, increasingly, in electric vehicle batteries.
The mine came online around 2012, immediately behind schedule and over budget. It never consistently reached its nameplate production capacity. Over the following decade, it was plagued by operational problems: technical challenges with the hydrometallurgical processing plant, infrastructure difficulties in a remote location without reliable road or port access, recurring disruptions from Madagascar’s tropical weather — including cyclones — and commodity price collapses that repeatedly made production uneconomic.
Sumitomo had been looking to exit for years. In early 2026, it announced a deal: it would transfer its entire 54.17% stake to Ambatovy Mineral Resources Investment Holding Company, a Jersey-based vehicle led by Jason Kluk — formerly the global head of nickel trading at Glencore, the world’s largest commodity trader — and South African businessman Sandile Zungu, whose investment firm Zico Holdings has mining and infrastructure interests across the continent. The transfer price was negative for Sumitomo: it paid $418 million to offload the asset, recognising that the ongoing liability of the mine exceeded any value it could extract from a sale.
Sumitomo retained one concession: ongoing nickel offtake rights — meaning it can still buy the nickel Ambatovy produces at agreed prices, maintaining its supply chain interest without carrying the operational risk.
The day the announcement was made, Sumitomo’s shares hit an all-time high. Investors celebrated the end of a 20-year bleeding wound on the balance sheet.
Breaking It Down — Plain English
What is a “laterite” nickel mine and why is it harder than other mines? There are two main types of nickel deposits. Sulphide deposits are underground veins of nickel-bearing rock — expensive to mine but the processing is relatively well understood. Laterite deposits are surface-level, formed by the weathering of rocks over millions of years. They are often found in tropical climates. Ambatovy is a laterite deposit. The processing of laterite nickel requires a complex chemical process called High Pressure Acid Leach — which involves large amounts of sulphuric acid, high-pressure vessels, and extreme precision. It is technically demanding, expensive to run, and sensitive to operational disruptions. Many laterite projects globally have struggled for exactly the same reasons as Ambatovy.
What is “nameplate capacity”? The designed maximum output of a mine or processing plant — what it was engineered to produce per year under ideal conditions. When a mine operates “below nameplate capacity,” it means actual output is less than what it was designed to deliver. At Ambatovy, design capacity was never consistently achieved, which meant the fixed costs of running the plant were spread over less output — making each unit of nickel produced more expensive, not less.
What is a “nickel offtake agreement”? An agreement where a buyer commits in advance to purchasing a specified quantity of a commodity from a producer. Sumitomo’s retention of offtake rights means that even after exiting ownership, it has the contractual right to buy Ambatovy’s nickel output at agreed terms. This is common in mining exits — it lets the seller maintain supply chain continuity while shedding operational risk.
Why did Sumitomo’s share price go up when they announced a $418 million loss? Because financial markets price in the future, not just the past. Sumitomo had been carrying Ambatovy as an ongoing liability — losing money every year, with no clear path to profitability. By paying $418 million to exit, Sumitomo removed that future liability from its books. Investors calculated that the $418 million exit cost was less damaging than continued years of operational losses. Paying to get out was cheaper than staying in. The share price rise was the market’s verdict: good decision.
What It Means for Africa — and for Malawi
Africa holds an enormous share of the world’s critical mineral reserves. The Democratic Republic of Congo has over 70% of the world’s cobalt. Zimbabwe, South Africa, and Madagascar have significant nickel. Guinea has the world’s largest bauxite reserves. Malawi has confirmed deposits of uranium, rare earth elements, coal, and industrial minerals. The Kayelekera uranium mine operated briefly, the Mkango rare earths project has attracted investment interest, and coal deposits in the Shire Valley have been studied for decades.
The Ambatovy story is a warning and a lesson simultaneously.
The warning is that resource deposits alone are not wealth. A $3 billion investment over 20 years that generates $2.7 billion in losses and requires a $418 million exit fee is not a development story — it is a destruction of capital story. The factors that turned Ambatovy from asset to liability include: technical complexity that was underestimated, infrastructure deficiencies that were never resolved, and commodity price cycles that made economics fragile. All three of those risk factors apply in varying degrees to undeveloped mineral projects across Africa.
For Malawi specifically, the lesson has two sides. On the risk side: attracting a mining investor is not the same as benefiting from a mine. A mining project that requires decades of investment before generating revenue, runs into technical difficulties, and faces infrastructure gaps can cost a country more in foregone alternatives than it gains in revenue. Any Malawian mining investment case needs to be stress-tested against commodity price cycles, technical risk, and infrastructure cost.
On the opportunity side: the new consortium taking over Ambatovy is led by a former Glencore nickel executive with deep operational expertise and a South African investor with continental mining networks. This signals something important — African and African-experienced private capital is now taking on assets that major global players are exiting. That trend, if it continues, means that the ownership of African mineral assets may increasingly sit closer to home.
What To Watch
- Ambatovy production restart: Operations were suspended in February ahead of Cyclone Gezani. Watch for the confirmation of restart in the current quarter — and whether the new consortium stabilises production where Sumitomo could not.
- Nickel price trajectory: Nickel is central to EV batteries. Its price spiked in 2022 and has been volatile since. Watch the LME nickel price — if it recovers above $20,000 per tonne, Ambatovy’s economics look better for the new owners.
- Other Japanese and Western mining exits from Africa: Sumitomo is not alone. Several major mining houses have been reassessing their Africa portfolios. Watch for whether other large-scale exits follow — it would signal a broader re-pricing of African mining risk.
- Malawi mineral investment signals: Watch for updates on the Mkango Resources rare earths project (Songwe Hill deposit) and any new government engagement with mineral investment frameworks. The credibility of Malawi’s investment terms — royalties, tax stability, and infrastructure commitments — will determine whether the next Ambatovy builds here or elsewhere.
- Critical minerals demand: Cobalt and nickel are essential for electric vehicle batteries. As EV adoption accelerates globally, demand for both will increase significantly. The countries and companies that manage their critical mineral assets well in the next decade will be in a fundamentally different position by 2035.
Sources
- Sumitomo to Exit Ambatovy Nickel Project in Madagascar — Mining.com
- Sumitomo Pays $418 Million To Exit Ambatovy Nickel Project — Finimize
- Japan’s Sumitomo to Divest Stake in Madagascar Nickel Project — Bloomberg
- The Inside Story: Sandile Zungu and a Former Glencore Trader Take Over Sumitomo’s Failed Madagascar Nickel Mine — Billionaires Africa
- Sumitomo Corp to Exit Ambatovy Nickel Project in Madagascar — Kitco News
- Sumitomo to Exit Madagascar Nickel Project; Shares Hit Record High — Investing.com
Malawi has confirmed deposits of uranium, rare earths, coal, and industrial minerals that have attracted foreign interest for decades but rarely resulted in operational mines. If a Japanese company with $3 billion and 20 years could not make the Ambatovy nickel mine work in Madagascar, what does a credible, bankable mining investment case actually look like for Malawi — and who needs to build it?