Pacific Nickel Suspends Kolosori Project Amid Financing Talks and Nickel Price Slump

Operational Pause at Kolosori Nickel Project

Pacific Nickel Mines Limited (ASX: PNM) has reported a challenging December 2024 quarter, marked by a suspension of operations at its Kolosori Nickel Project located on Isabel Island in the Solomon Islands. The decision to halt mining activities was driven by a combination of weak nickel prices, operational difficulties, and the need to address project funding constraints. The company demobilised mining equipment by the end of August 2024 and has since engaged a local mining contractor to ensure compliance with mining licence requirements.

Despite the operational pause, Pacific Nickel managed to dispatch one shipment of nickel ore late in the quarter. This shipment was intended to provide working capital to maintain site activities and regulatory compliance, underscoring the company’s efforts to sustain the project amid challenging conditions.

Financing Uncertainty and Voluntary Suspension

Central to Pacific Nickel’s current predicament is its financing arrangement with Glencore International AG, which provided a US$22 million secured loan facility to support the development of the Kolosori project. While production commenced in late 2023, Pacific Nickel has not yet begun repayment of this loan, prompting Glencore to reserve its rights regarding the project debt. The company remains in voluntary suspension on the ASX since July 2024, as it continues negotiations with Glencore to resolve funding issues exacerbated by the weak nickel price outlook.

During the quarter, Glencore advanced A$2.512 million to Pacific Nickel’s Solomon Islands subsidiaries to maintain leases and pay local creditors, reflecting ongoing efforts to preserve the project’s viability. However, the company’s liquidity remains tight, with cash reserves sufficient for approximately 1.4 quarters of funding based on current outgoings, highlighting the urgency of securing a sustainable financing solution.

Corporate Restructuring Amidst Challenges

In addition to operational and financial hurdles, Pacific Nickel underwent notable leadership changes during the quarter. CEO and executive director Geoff Hiller resigned in October 2024 but continues to assist the company as needed. What's more, director James Dean stepped down in November 2024, with company secretary Gary Stewart appointed as a new director. These shifts signal a potential strategic recalibration as the company navigates its current challenges.

Pacific Nickel is also exploring alternative business opportunities beyond the Kolosori project, a move that may reflect a broader reassessment of its portfolio and growth prospects in light of market conditions.

Looking Ahead

The company’s immediate future hinges on the outcome of its discussions with Glencore. The resolution of financing arrangements will be critical not only for resuming operations at Kolosori but also for maintaining Pacific Nickel’s financial viability. Investors will be watching closely for updates on these negotiations and any strategic shifts that may emerge as the company seeks to adapt to a volatile nickel market.