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MiningNews

Smelter shutdown to cost BHP, but good news for the nickel price
Thursday, 12 June 2008
Kate Haycock

BHP Billiton’s Nickel West sales will be slashed by 28,000 tonnes after the company said the furnace at the Kalgoorlie Nickel Smelter needed to be immediately rebuilt, shutting down smelting operations at the project for four months.

The major miner said today an assessment of the furnace condition had determined the rebuild was needed immediately for safety reasons.

The shutdown will last for four months, costing the miner sale of some 25,000 tonnes of contained nickel in the next financial year and 3000t in the current financial year.

Operations at the Kalgoorlie nickel smelter normally produce around 100,000t of nickel-in-matte per annum.

In 2007 BHP produced 186,300t of nickel from across its operations, netting the company earnings before interest and tax around $US3.7 billion.

However, this year the company has added the Ravensthorpe nickel laterite mine in Western Australia to its lineup and commissioned the Yabulu refinery in Queensland, which may offset some production losses from the smelter shutdown.

The furnace refurbishment will also force the shutdown of the Kwinana nickel refinery, but BHP said its Nickel West operations would continue to concentrate production in the interim, leaving the miner with stockpiles for processing when the smelter returns to operations.

Given the gas shortage in WA, BHP said it was reallocating gas from the smelter operations to the Worsley Alumina Refinery.

The news put pressure on BHP’s share price this morning, sending it down $A1.46 to $41.98.

A BHP spokesperson told MiningNews.net the rebuild had been brought forward because of the smelter’s deterioration and safety issues, and the WA gas shortage had not been a factor.

BHP has indicated Worsley Alumina’s operations was suffering reduced gas supplies in the wake of the Varanus explosion last week, but that impact has yet to be quantified.

It is also unclear if the additional gas supply from the Kalgoorlie Nickel Smelter will bring Worsley back to full capacity.

BHP has not released any financial estimates on the level of impact to its bottom line from the refinery shutdown.

The spokesperson said there should be no job losses associated with the shutdown, and 200-500 additional contractors will be needed onsite during the furnace rebuild.

News of the shutdown is expected to have a strong impact on the nickel price, with one analyst telling Dow Jones Newswires the outage could send the nickel market from supply surplus into a deficit.

BHP’s Nickel West operation combines the ore from six operations, and is the third-largest nickel-in-concentrate producer in the world, suppling some 16% of global nickel-in-concentrate demand.

Shares in BHP have slipped $1.52 to $41.92 in afternoon trade.