Sumitomo Corp (>> Sumitomo Corp) said on Tuesday it and Korea Resources Corp (Kores) [KOREC.UL] will get a larger stake in the Ambatovy nickel project in Madagascar, as part of a debt restructuring deal with partner Sherritt International Corp (>> Sherritt International Corp).
Sherritt's stake in the project will be reduced to 12 percent from 40 percent in exchange for the elimination of C$1.4 billion ($1.02 billion) of debt owed to Sumitomo and Kores, according to the revised joint venture agreement.
The revised terms "removes the largest area of uncertainty for both Ambatovy and Sherritt," Sherritt Chief Executive David Pathe said on Monday.
Sumitomo's stake will increase to 47.7 percent from 32.5 percent and Kores' share will climb to 40.3 percent from 27.5 percent, Sumitomo said.
Toronto-based Sherritt said it will remain the operator of Ambatovy, which consists of a nickel-cobalt mine and processing and refining facilities, until at least 2024.
The deal is expected to be finalized by the end of September, a Sumitomo spokeswoman said.
Sumitomo's total exposure to the Ambatovy project was around $1.7 billion, including about $600 million loans to Sherritt.
Sumitomo said in February nickel output at Ambatovy reached 42,100 tonnes in 2016, and was expected to rise to 48,000-52,000 tonnes this year.
But Sherritt said last month that Ambatovy nickel production in the first quarter of this year was down 14 percent from a year ago, and down 25 percent from the previous quarter.
(Reporting by Nicole Mordant in VANCOUVER and Yuka Obayashi in TOKYO; Editing by Leslie Adler, James Dalgleish and Randy Fabi)