Laggard Nickel Claims a Victim as First Quantum Shuts Mine

(Bloomberg) -- The worst-performing base metal claimed another victim.

First Quantum Minerals Ltd. announced on Wednesday its decision to suspend the Ravensthorpe nickel operation in Western Australia after the metal used in stainless steel production missed a rally by everything from aluminum to zinc.

The Vancouver-based company will place Ravensthorpe on care and maintenance next month at an estimated cost of $10 million, plus $5 million annually. Restarting would cost about $10 million, it said in a statement. The company's shares lost as much as 4.4 percent in Toronto, the worst performance among peers.

“Ravensthorpe is an excellent operation with an outstanding workforce and supportive community but the continuing depressed nickel market conditions, over some years, leaves us no option,” Chairman Philip Pascall said.

First Quantum bought the shuttered Ravensthorpe from BHP Billiton Ltd. in 2009 for $340 million and restarted operations in 2011, a year in which nickel prices averaged about $22,865 a metric ton. In the following years, commodity markets endured the biggest downturn in a generation as a slowdown in Chinese demand coincided with rising supply, leading to gluts.

While industrial metals such as copper and zinc have rallied more than 30 percent in the past year, nickel is little changed with prices averaging just $9,795 in 2017 as Indonesia lifted some restrictions on shipments, offsetting mine closures in the Philippines. Other companies, including top producer Vale SA, are also reviewing their nickel operations.

With Ravensthorpe's capacity accounting for about 1 percent of global nickel supply, its suspension should be supportive for the market, Peter O'Connor, a Sydney-based analyst with Shaw and Partners Ltd., said in a note.

In late 2015, First Quantum was said to be working with Jefferies Group LLC to identify potential buyers for the mine.

--With assistance from Susanne Barton and Luzi Ann Javier

To contact the reporters on this story: James Attwood in Santiago at jattwood3@bloomberg.net, David Stringer in Melbourne at dstringer3@bloomberg.net.

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net.

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