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.
