BHP to Cut Output at Australia's Mt Keith Nickel Mine

SYDNEY, Feb. 3 --  BHP Billiton will cut staff and reduce mine activity at its Nickel West unit in Australia in response to weak metals prices and the negative impact of a strong Australian dollar, the company said on Wednesday.

BHP Billiton plans to reduce mine production by 30 percent at its Mt Keith nickel mine in Western Australia state for about a year and eliminate some 150 jobs, a company spokeswoman said.

Overall nickel production was unlikely to change since the company will draw on existing stockpiles of nickel concentrate to make up for the shortfall, while operating at the reduced level, the spokeswoman said.

The company will aim to redeploy workers affected by the job losses to other company operations in Australia, including its iron ore division, the spokeswoman said.

Nickel -- priced universally in U.S. dollars -- peaked at just under $29,500 a tonne in late February 2011 and prices have largely been on a downslope since. LME three-month nickel currently trades for around $20,600 a tonne.

Progress in rejigging equipment to allow for processing of talc-bearing ore types for the first time, will allow mining activity to be reduced, though production will be maintained through the use of stockpiled ore, the spokeswoman said.

"Mining operations in Mt Keith will be reduced for about 12 months, but the overall rate of concentrate production will be largely unchanged because we will be able to draw on existing stockpiles," she said.

The nickel market is expected to be oversupplied this year, with HSBC analysts recently raising their forecast for a surplus to 62,000 tonnes from an earlier 31,000 tonnes.

BHP Billiton is the world's third-largest nickel producer. In the quarter ended Dec. 31, 2011 it produced 38,400 tonnes of the metal, used chiefly in making stainless steel. Some of the nickel was produced by the company's Cerro Matoso operation in Colombia.

The world market for nickel stands at around 1.3 million tonnes per year.

The curtailment by BHP Billiton comes as rival First Quantum Minerals readies the nearby Ravensthorpe nickel mine for reactivation following a major refit.

BHP shut down Ravensthorpe in 2009 after nickel prices plummeted due to the crippling effect of the global financial crisis on commodities demand.

Ravensthorpe was designed by BHP Billiton to supply around 55,000 tonnes of nickel annually but never came near that rate before closing.

Separately, BHP Billiton said it will sell its 37 percent interest in Richards Bay Minerals in South Africa to Rio Tinto RIO.L> and will exit the titanium minerals industry.

The unit produces chloride titanium feedstock.

BHP Billiton is expected to show a half-year profit of around $10 billion, based on consensus estimates, down slightly from $10.7 billion in the corresponding period a year ago.

On Jan. 18, BHP Billiton warned its Australian nickel operations remained sensitive to persistent weakness in nickel prices and the strong Australian dollar.