South32 offloads Colombian mine Cerro Matoso amid flood of ‘dirty’ nickel and books $US130m impairment

South32 is taking a $US130 million ($200m) accounting hit to sell the Cerro Matoso nickel operation in Colombia to a Turkish tycoon’s company for up to $US100m. The deal will see CoreX — established by Turkish billionaire Robert Yuksel Yildirim in 2024 — pay a “nominal consideration” upfront to take control of Cerro Matoso. The ageing mine has been in operation since 1982. Announcing the deal on Monday, Perth-based South32 said the transaction followed a strategic review in response to structural changes in the nickel market. Prices of the battery metal have plummeted since cheap Chinese-backed supply from Indonesia mines started flooding the market two years ago. Indonesian nickel is typically labelled as ‘dirty nickel’ in the Australian mining industry given the lax environmental rules for mining and refining in the South-east Asian country. CoreX will make future cash payments of up to $US100m, including up to $US80m linked to future production and nickel prices. The other $US20m is divided into four equal payments based on permitting milestones within the next five years for the Queresas and Porvenir North extension project. South32 is booking an impairment of approximately $US130m following the sale. RBC Capital Markets analyst Kaan Peker estimates South32 will end up receiving $US60m for the sale of Cerro Matoso. “Based on our expectations of the nickel price, ferro-nickel discount and the announced price-linked consideration, we estimate S32 will be paid approximately $US40m of the $US80m price-linked consideration,” Mr Peker said. “We also expect S32 will receive the (entire) Queresas & Porvenir North project contingent payment. Shares in South32 were trading flat by 10.40am. “The transaction is consistent with our strategy and will further streamline our portfolio toward higher margin businesses in minerals and metals critical to the world’s energy transition,” outgoing South32 chief executive Graham Kerr said. “It (delivers) a clean separation of Cerro Matoso and provide additional balance sheet flexibility to support investment in our growth options in copper and zinc. “Cerro Matoso has a long and proud history in Colombia. Over the coming months we will work with the buyer, our workforce, the local communities, government, customers and suppliers to support a successful transition of ownership.” Mr Kerr in May agreed to step down as South32’s chief executive at some stage in 2026 after more than a decade in the job. South32 reportedly started interviewing replacements for him in 2023. He will be replaced by Anglo American technical and operational director Matthew Daley. Mr Daley stands to rake in more than $7 million of cash and stock options to leave his current employer, on top of a multi-million-dollar base salary and stack of performance incentives dangled in front of him to run South32. Mr Daley will be paid a base salary of $2 million a year, plus short-term incentives with a “target value” of 120 per cent of base salary, and long-term incentives with an “indicative face value” of 200 per cent of salary. Mr Kerr has been the diversified miner’s only chief, taking the reins in October 2014 during the demerger from BHP. South32 started trading on the Australian Securities Exchange in May 2015.