Xstrata Nickel Restructures Sudbury

Xstrata Nickel has announced plans to restructure its Sudbury operations in order to weather the challenging ongoing market conditions. The restructuring follows the company’s announcement in November 2008 to accelerate the closure of the Craig and Thayer-Lindsley operations at Sudbury, both of which will cease operations with immediate effect.

As a result of the programme, the Fraser Mine Complex will be placed on care and maintenance and associated support and administrative functions will be reorganised. The Strathcona Mill, with annual capacity of 2.7Mt of ore, will be reduced to two work shifts from four as a result of reduced feed. In addition, the Fraser Morgan development project will be deferred. The project will be evaluated on an ongoing basis and may be re-initiated when economic conditions improve.

The restructuring will not affect Xstrata’s flagship Nickel Rim South project in the Sudbury basin. This remains on schedule to ramp up to 60% of its ultimate 1.25Mt per annum production capacity in 2009. The project is estimated to have an annual production of approximately 18,000t of recoverable nickel by early 2010. The company has invested C$627 million for the project’s first phase, which was completed on time and within budget, and has approved the remaining project capital expenditure of C$300 million for the completion of mine development and infrastructure.

Total production from the Sudbury Smelter is expected to remain at a similar level to 2008 production, as shortfalls arising from the cessation of Sudbury Mines will be compensated by concentrates from Nickel Rim South and Xstrata Nickel Australasia. The company reports that concentrates will continue to be processed from its Montcalm and Raglan operations, together with third-party feed.

The restructuring will see 686 permanent employees made redundant, including both union and salaried employees in operational and non-operational roles. A three-day stoppage of operations was initiated to allow the restructuring to occur.

Ian Pearce, Xstrata Nickel’s CEO commented: “Our leadership team is taking proactive and decisive measures during challenging times. The continued decline of the economic environment and deteriorating commodity markets, coupled with high operating costs particularly at our older mines, are negatively impacting our Sudbury operations. The actions announced today aim to ensure our operations remain financially robust even during a potentially long period of depressed commodity prices and establish a strong foundation for further growth in the region.”