Xstrata throttles back Sudbury nickel output, chops 686 jobs

Continued low nickel prices are forcing Xstrata (XTA-L) subsidiary Xstrata Nickel to step up the shrinking of its nickel mining and milling assets in Ontario’s Sudbury basin.

In November, the Swiss-based mining giant had announced that it would accelerate the closure of its aging Craig and Thayer-Lindsley operations in Sudbury, but now both of these operations have been closed.

Meanwhile the Fraser mine complex will be placed on care and maintenance, and associated support and administrative functions will be reorganized.

With less mill feed being produced, Xstrata is halving to two the number of shifts at its Strathcona mill, which has an annual capacity of 2.7 million tonnes of ore.

Lastly, Xstrata is deferring its Fraser Morgan mine development project indefinitely.

The moves eliminate 686 permanent positions, including both unionized and salaried employees in operational and non-operational roles.

The company adds that it will provide for the affected employees both professional outplacement services and expanded employee assistance programs.

But Xstrata is forging ahead with its Nickel Rim South project, and the company reports that the project remains on schedule to ramp up to 60% of its ultimate 1.25 million tonne per annum production capacity in 2009, equivalent to approximately 7,400 tonnes of nickel.

The company describes Nickel Rim South as becoming a “low-cost, cornerstone operation” in Sudbury, generating annual production of approximately 18,000 tonnes of recoverable nickel by early 2010.

Xstrata has already spent $627 million on the project’s first phase, which came in on time and on budget, and has approved the remaining $300 million needed to complete mine development and infrastructure.

The company expects total production from its Sudbury smelter to stay at 2008 levels as shortfalls arising from the new mine closures are made up by concentrates from Nickel Rim South and its Australasian assets.

It notes that concentrates will continue to be processed from Xstrata Nickel’s Montcalm and Raglan operations in Canada, together with third-party feed. The company is the world’s fourth-largest nickel producer.

“The actions announced today aim to reposition our Sudbury complex into the bottom quartile of the cost curve, ensure our operations remain financially robust even during a potentially long period of depressed commodity prices and establish a strong foundation for further growth in the region,” said Ian Pearce, Xstrata Nickel chief executive, in a statement.