Anglo to Quadruple Nickel Output in 10 Years as It Chases Norilsk and Vale

May. 3 -- Anglo American Plc (AAL), the diversified mining company with about $70 billion of expansion plans, aims to more than quadruple nickel output this decade to better compete with larger rivals OAO GMK Norilsk Nickel and Vale SA.

The London-based company may produce as much as 180,000 metric tons by 2020 as it ramps up output at its Barro Alto project in Brazil and weighs investing another $6 billion in two new ventures in the country, Walter De Simoni, chief executive officer of Anglo’s nickel unit, said yesterday in an interview.

Competitors such as Vale and Xstrata Plc. (XTA) are boosting output after prices for nickel, used in stainless steel to prevent corrosion, surpassed $29,000 per metric ton in February, the highest since April 2008. Global output is expected to climb about 10 percent, or 163,000 metric tons, to 1.83 million tons this year, according to Bank of America Corp. (BAC), as the economic recovery boosts metals demand in construction and industry.

"The nickel business is going very well,” De Simoni, a Brazilian national, said on the sidelines of the World Economic Forum conference in Rio de Janeiro yesterday. “After the 2008 crisis, the nickel business recovered faster than everybody would have thought and the price now is much stronger.”

Anglo started production at the $1.9 billion Barro Alto nickel project in Brazil’s Goias state last month and is aiming for average output of 41,000 metric tons annually in the first five years after attaining full capacity in 2012. The company may add a further 112,000 tons per year from two projects in Brazil - Jacare and Morro Sem Bone - which are yet to be approved and may require about $6 billion, he said.

Nickel Output
Still, Anglo’s current output of 38,700 tons is dwarfed by that of larger rivals. Norilsk, the world’s biggest producer, said Jan. 31 that output may rise to as much as 315,000 metric tons this year, 5.9 percent higher than in 2010. Vale, which aims to overtake Moscow-based Norilsk, plans to reach 295,000 metric tons this year after producing 179,000 tons in 2010.

"Nowadays nickel is a small business in Anglo and we have the big responsibility and challenge to make it grow,” said De Simoni, 55, who’s based in Sao Paulo. “When Barro Alto is at full capacity, we will be achieving more than $1 billion in revenues, from $300 million now.”

Export Market
More than 80 percent of the nickel from Barro Alto is destined for export, mainly to European customers such as ArcelorMittal, the world’s largest steelmaker, ThyssenKrupp AG and Acerinox SA, he said. The company has also begun exporting the metal to China, De Simoni said.

Anglo has been operating in Brazil since 1973 and has two units for its nickel and iron-ore businesses, according to the company’s website. The first iron-ore from its $5 billion Minas Rio project will be shipped in the second half of 2013.

De Simoni started his career in Anglo in 1978 and was named head of the nickel unit in 2009. He was appointed president of Anglo’s base metals unit in Brazil in 2005 and became CEO of the company in that country a year later.

The metal for three-month delivery on the London Metal Exchange fell $20, or 0.1 percent, to close at $26,630 a metric ton yesterday.