Falconbridge to cut output by 12,000 tonnes of nickel

Taking its cue from fellow nickel miners Inco Ltd. (TSE) and SLN of France, Toronto-based Falconbridge Ltd. is cutting back production at operations in Sudbury, Ont., and the Dominican Republic.

Falconbridge says it has already advised both unions and employees of its plan to close the Sudbury mines for five weeks next summer between June 28 and Aug. 4 because of the weak outlook for nickel prices.

The Sudbury operations are already scheduled to close for two weeks at Christmas and the company plans to continue operating its Dominician plant at 50% of capacity at least until the end of February. As a result, the Nikkelverk refinery in Norway will also be shut down for four weeks next summer.

Falconbridge expects its nickel output in fiscal 1991 and 1992 to drop by about 12,000 tonnes or 19% of last year’s production as a result of these measures.

Nesbitt Thomson analyst Julian Baldry said similar steps taken by Inco and SLN are designed to prevent any repeat of the factors that drove nickel prices down to US$2.66 per lb. from a high of US$4.02 last year. He said last year’s price drop was due to the perception among brokers that nickel supply was far outweighing demand for the metal.

Trading at US$4.18 per oz. recently, nickel has averaged US$3.79 this year on the spot market, a level that nickel miners consider too low for comfort. “We can’t justify re-investing in our Sudbury operations because at these prices there is no return,” says Falconbridge spokesman Richard Laine. While Laine declines to speculate on the future outlook for nickel, Baldry says nickel inventories are low and because there is only a slight surplus in the supply side, any upturn in the economic situation should spark a rally. Falconbridge is owned equally by Toronto-based Noranda (TSE) and Trelleborg AB of Sweden.