BHP to Shut Nickel Furnace for Revamp Ahead of Plans (Update3)
By Rebecca Keenan
June 12 (Bloomberg) -- BHP Billiton Ltd., the world's largest mining company,
will shutdown a nickel smelter and refinery in Western Australia for four
months, limiting supply and sending prices of the metal higher.
An earlier-than- planned rebuild of the Kalgoorlie smelter furnace will reduce
nickel sales by a total of 28,000 metric tons, the Melbourne-based company said
today in a statement. The Kwinana refinery, the world's third-largest producer
of the refined metal, will be shutdown during the rebuild, the company said.
``It's about 2 percent of global nickel supply and that's a fair amount,'' Mark
Pervan, senior commodity strategist at Australia and New Zealand Banking Group
Ltd., said today by phone from Melbourne. ``It would put a nice floor under the
nickel price. It won't be huge but it could get back towards $30,000 a ton.''
Nickel in London rose as much as 6 percent today to $24.585, extending gains
this month on concern power disruptions in Western Australia and declining
stockpiles will crimp supply. Nickel usage will climb to a record this year as
output of stainless steel recovers, the International Nickel Study Group said
in April.
BHP fell A$1.64, or 3.8 percent, to A$41.80 at the 4:10 p.m. Sydney time close
on the Australian stock exchange. The stock has risen 4.1 percent this year,
while the benchmark index has declined 16 percent.
Australian Cuts
Minara Resources Ltd., Australia's second-largest nickel producer, cut output
forecasts this week after a fire at a natural gas plant slashed supplies of the
fuel in Western Australia by 30 percent. Annual nickel production may fall by
as much as 23 percent, Minara said. BHP also was affected by the outage and
natural gas used at Kalgoorlie will be reallocated to the Worsley alumina
refinery, the company said today.
BHP stands to gain the most from any increase in the nickel price, compared
with Anglo American Plc, Cia. Vale do Rio Doce and Rio Tinto Group, according
to an April report by ING Bank NV. BHP's profit increases by $50 million for
every 25 cent per pound gain in the nickel price, it said. Xstrata's profit
would rise by $35 million, it said.
BHP's stainless steel division, which includes the nickel business, was BHP's
biggest unit by sales last year, with earnings before interest and tax tripling
to $3.7 billion. BHP produced 186,300 tons of nickel in the year ending June
30, 2007.
Nickel Mines
The Kalgoorlie smelter processes ore from BHP's Kambalda and Leinster nickel
mines in Western Australia. Once smelted the product is railed to the Kwinana
refinery and then onto the Port of Fremantle for export.
The Kalgoorlie smelter normally produces about 100,000 tons of nickel-in-matte
a year, the company said. It supplies the Kwinana refinery and international
customers.
BHP also buys ore from nearby nickel producers, including Mincor Resources NL,
and processes the ore at the smelter. BHP is planning to stockpile nickel
concentrate at the smelter, though the company hasn't given a ``a definitive
guarantee everything will continue on business as usual,'' Mincor said today in
a statement.
