First Quantum to shut Ravensthorpe nickel mine

Canadian miner First Quantum Minerals (TSX: FM) has decided to close its Ravensthorpe nickel operation in Western Australia.

The ceasing of operations at the mine this week will cut around 330 jobs, Australia’s ABC News reported on Monday, citing a company statement. 

“Despite our best efforts to maintain operations by transitioning to a new operating strategy that involved ceasing mining activities, processing stockpiles and altering its approach to production, the site is incurring significant current and projected losses,” First Quantum said in a separate statement.

The company said the decision to shut down the mine, with the process starting on May 1, was the best strategic move as it leaves the orebody intact for future value. Ravensthorpe is located about 500 km south-east of Perth. 

The plan to put the mine into care and maintenance comes just four months after First Quantum halted production there, saying at the time that it would be idled for at least two years. During that time, First Quantum intended to process stockpiles well into 2025 and then consider resuming mining.

First Quantum decided to halt operations amid difficulties in finding a sustainable financial model for Ravensthorpe, higher operation costs, and lower nickel price forecasts for the next few years.

Flurry of closures

Prices for nickel, traditionally used in steelmaking and increasingly in the manufacturing of batteries, have been hovering around three-year lows, closing on Monday at US$8.55 per pound. China-backed projects in Indonesia are ramping up output at lower costs than competitors. Nickel was the worst performer among the base metal complex on the London exchange and the Shanghai Futures Exchange last year, losing more than 40% of its value on both markets.

First Quantum joins other nickel miners in Australia who in the last several months also opted to shutter operations.

Last November, Panoramic Resources (ASX: PAN) said it had launched a strategic review of its flagship Savannah nickel project in Western Australian. In January, it announced operations were suspended, and in the following weeks seniors managers left the company. 

Also in January, private producer Wyloo Metals Pty Ltd. announced it would close its West Australian mines, with its operations near Kambalda going into care and maintenance from May 31.  Glencore (LSE: GLEN) followed less than a month later, saying it would close and sell its stake in the loss-making Koniambo Nickel SAS (KNS) business it co-owns in New Caledonia, a French territory between Australia and Fiji. Just days later, BHP (NYSE: BHP; LSE: BHP; ASX: BHP) said it was considering shuttering its Western Australia nickel operation because of the price slump.

Panama woes

The mine’s closure adds to a difficult period for the company, after the Panamanian government last November ordered it to shut down its Cobre Panama mine following a Supreme Court ruling that declared the operation’s mining contract unconstitutional. Shortly afterwards, First Quantum announced it had started international arbitration procedures to protect its rights. 

Major suppliers to the Ravensthorpe mine have been notified to allow them to prepare for the shutdown of activities at the site, the miner said.

The nickel operation is the largest employer in Ravensthorpe and nearby Hopetoun. 

The mine has always been viewed as a relatively high cost operation, and was previously suspended in 2009 and 2017. The closure in 2009 left 1,800 people unemployed, while the shutdown in 2017 resulted in the loss of 450 jobs.

Last year, it produced about 30,000 tonnes of nickel in mixed hydroxide precipitate, and close to 1,000 tonnes of cobalt. 

First Quantum shares closed nearly 4%% lower on Monday in Toronto at to $17.57 apiece, valuing the company at $14.7 billion. Its shares have traded in a 52-week range of $9.31 and $39.13.