As nickel prices drop, Switzerland-based Xstrata and other miners need to cut production costs to stay competitive. In addition to dropping 250 employees through a voluntary retirement program and ramping production at low-cost mines, Xstrata recently announced plans to cease operations at two Canadian mines. Both mines were approaching the end of their cycle, but Xstrata has moved the closures ahead of schedule.
“In the current environment, these older, higher cost operations are no longer viable,” Ian Pearce, Xstrata Nickel Chief Executive, said in a statement about the mine closures. Xstrata’s Craig mine will close in June 2009, while production at the Thayer-Lindsley mine will end sometime before January 2009. Although one pound of nickel currently sells for about $4.50 in Canada, it reportedly costs Xstrata $8 per pound during Thayer-Lindsley mine production.
According to a Dow Jones news release, this move will drop 8,200 metric tons of annual production for the company. At the same time, lower-cost mines Nickel Rim South and Fraser Morgan mines in Sudbury, Canada, are set to replace these more expensive mines.
The economic downturn and decreased demand from the stainless steel industry has hurt several nickel and ferrochrome producers. Xstrata, the world’s top ferrochrome producer, also recently slashed production at six ferrochrome furnaces in South Africa. To add to the miner’s concern, Xstrata joins zinc producer Nyrstar in fears over Australia’s recently proposed emissions trading scheme.