Vale shuts down nickel mine in Sudbury

As the world economy continues to unravel, Vale (RIO-n) is suspending its Copper Cliff South mine in Sudbury, shutting down operations at Voisey Bay for one month next July, and launching a voluntary retirement program.

Voisey’s Bay, in the province of Newfoundland and Labrador, produced 58,000 metric tons of finished nickel and 39,000 metric tons of copper in concentrate in the first nine months of the year. Copper Cliff South produces 8,000 metric tons of finished nickel each year.

The world’s second-largest mining company also announced it would postpone the start of development for a year at its Copper Cliff Deep project. Vale had planned to spend US$138 billion on its development in 2009. The total investment cost for the project is estimated to be US$814. (The project involves replacing the current shafts at the Copper Cliff North and South mines with a single shaft.)

Further cost-cutting initiatives include an early retirement program for its staff worldwide.

The news sent Vale’s shares in mid-day trading in New York down 2.5% to $9.89 per share, with 12.6 million shares changing hands.

Over the last year, Vale has traded in a range of $8.80-$44.15 per share.

Today’s announcement follows closely on the heels of a similar announcement on Nov. 21 that Vale planned to shut down two-thirds of its pellet production from the end of November to mid-January at its joint venture Samarco. Vale holds a 50% stake in the joint venture, whose production capacity is 21.56 million metric tons of pellets a year.

Vale is the largest producer and exporter of iron ore and pellets and holds a third of the transoceanic market. The company is also the world’s second-biggest nickel producer after Russia’s Norilsk Nickel (NILSY-O, MNOD-L).

In October, Vale said the global slowdown of industrial production and in particular steel production meant that it would have to dramatically scale back its iron ore mining to adjust to an expected 20% production cut by the world’s steelmakers. As a result it cut iron production by an annual rate of 30 million tonnes or 10%.

Manganese ore and ferroalloy operations in Brazil also have been suspended from December to January, Vale’s Dunkerque ferroalloy plant in France will be idled until April 2009, and its plant in Mo I Rana, Norway, will have its furnace maintenance extended until June 2009.   

In Indonesia Vale is discontinuing the usage of higher-cost thermal power generation, which will lead to a reduction of nickel-in-matte output by 20%, amounting to approximately 17,000 metric tons. In addition, its utility nickel refinery in Dalian, China, will run at 35% of its nominal capacity.