Nickel Investing News

By Leia Michele Toovey- Exclusive to Nickel Investing News

Miners across the globe are a worried lot, what with the plunging price of nickel putting pressure on companies to streamline operations.

Mines in Australia have been especially hard hit, due to the weakening Australian dollar; down 10 per cent against the US greenback since mid July. Analysts have predicted a slew of closures in the sector in response to prices that have dropped to hit 60 per cent below their record highs of above US$51,000 a tonne 15 months ago.

Sydney-based BHP (BHP.AX); the world’s third largest nickel producer, is not planning on making any changes to its Australian nickel operations, though. In July, BHP had halted its operations at its Kalgoorlie nickel smelter and Kwinana refinery in Western Australia for four months of repair work. All other mines and processing facilities are operating as normal, according to a company spokeswoman. “We are not considering any changes to our operations,” she said. When questioned about the future of the nickel market, BHP Chief Executive Officer Marius said that it looked “manageable”.

With the low prices hitting the smallest companies the hardest, many nickel juniors are ripe for acquisition. Victory Nickel Inc (TSX.NI) is trying to capitalize on struggling Independent Nickel Corp (TSX.INI), and today made an offer to purchase 100 per cent of their outstanding shares. The proposed acquisition of Independent Nickel is complementary to Victory Nickel’s Manitoba properties, including existing regional infrastructure and development opportunities. “This transaction is a natural fit for our two companies which are focused on developing nickel projects in Manitoba,” said Rene Galipeau, Victory Nickel’s Vice-Chairman and Chief Executive Officer. “Economic, large-scale sulphide nickel deposits are a rarity, making Minago a very valuable asset and the cornerstone of Victory Nickel’s growth strategy to build a mid-tier nickel company.” Victory Nickel has offered Independent Nickel Corp a 32 per cent premium over the August 18, 2008 TSX closing price of Independent nickel shares. If the offer goes through, Independent Nickel shareholders will receive one Victory Nickel common share for each Independent Nickel share. Independent Nickel Corporation’s Board of Directors responded to the offer by advising shareholders to take no action in response to the takeover bid. Moving forward, the Board of Directors will form a special committee of independent directors to evaluate the bid. The Board of Directors will offer a formal recommendation to its shareholders regarding the Victory offer on or before September 3, 2008.

Two nickel giants, Industrial Metallurgical Holding and Xstrata (XTA.L), announced on Tuesday that they were cutting output of nickel in response to rising production costs and collapsing metal prices. Industrial Metallurgical, which produces about 5 per cent of Russia’s total nickel, shutdown two out of the five furnaces at the Reznickel plant facility. This will curb their output by as much as 40 per cent. “At the current prices, even this production volume is not profitable. The cuts are indefinite and the volume will be restored when prices rise, according to a company spokesman.

Xstrata’s cuts follow lost output this year from labour disputes and disruptions in Australia and South America. Xstrata is suspending its Falcondo nickel mining operation in the Dominican Republic due to high oil prices and lower nickel prices. Falcondo, with a work force of more than 1800, has an annual capacity of 29,000 metric tons of nickel. The shutdown is expected to last four months, during which time the company will conduct repairs and maintenance, and study a move to coal from oil as a power source. These moves reflect weaker prices for the metals. London Metal Exchange nickel prices are down some 66 per cent from their record high of US$51,800 per ton in May 2007.

Zinc, too, down

Zinc prices, too, are down 65 per cent from their November 2006 peak of US$4,580 a tonne. To read how zinc companies are coping with the downturn, read Tuesday’s report “Of Shaky Zinc Prices and Acquisition Plans”, exclusive to zincinvestingnews.com.