xstrata suspend high cost nickel mine

All must help to reduce supply and arrest the slide in nickel price.

Xstrata Suspends Nickel Operations After Price Plunge (Update2)

By Alaric Nightingale

Aug. 19 (Bloomberg) -- Xstrata Plc, the world's fourth- largest nickel refiner, suspended its Falcondo operations in the Dominican Republic after costs surged and metal prices plunged. Nickel advanced in London trading.

The suspension may last four months, Zug, Switzerland-based Xstrata said today in a statement. The operations produce 29,000 metric tons of nickel a year, equal to about 2 percent of world production of primary nickel.

Nickel advanced $200, or 1.1 percent, to $18,250 a ton as of 7:21 a.m. in London. The metal, used in stainless steel, reached a record $51,800 a ton in May 2007.

``The resumption of activities will be assessed based on market conditions, which are expected to improve towards the end of 2008,'' Ian Pearce, chief executive officer of Xstrata Nickel, said in the statement.

Other nickel producers have already cut production or delayed projects. Industrial Metallurgical Holding, Russia's third-largest producer, shut its two nickel plants for 10 days at the end of July for maintenance and is considering reducing output. Minara Resources Ltd., Australia's second-largest producer, also deferred an expansion plan.

Falcondo, comprising a mine and treatment plant, is 85.3 percent owned by Xstrata and employs 1,300 people. Most of the workers will carry out maintenance during the suspension, Xstrata said. The company plans to use the time to review whether to switch the plant's power source to coal from oil.

The operation produces ferronickel, a combination of iron and nickel used by stainless steel producers. Falcondo, which started in 1971, also has a crude-oil refinery and a 200 megawatt power plant. The refinery splits crude oil into naphtha for the furnaces, diesel for transport and fuel oil for the power plant.

To contact the reporter on this story: Alaric Nightingale in London at [email protected]

Last Updated: August 19, 2008 02:44 EDT