Diversified miner Xstrata, which is bidding to buy Lonmin for $10-billion, on Tuesday announced the temporary shutdown of its Falconbridge Dominicana (Falcondo) nickel operation, owing to high input costs and low metal prices.

The shutdown, which confirmed BHP Billiton CEO Marius Kloppers’ prediction on Monday that the industry would see closures, would last for four months, while Xstrata would conduct furnace repairs and crucial maintenance activities.

“It wouldn’t surprise me if we see shutdowns,” Kloppers said of the nickel industry, after cost pressures and low prices ate into margins.

Falcondo, based in the Dominican Republic, had a capacity of 29 000 t/y of nickel in ferronickel.

Xstrata said in a statement that it would also use the shutdown period to accelerate feasibility studies to use coal to generate power for the operation, instead of oil, which it currently uses. Oil made up a significant portion of the operation's costs, it stated.

It would also speed up studies into a nearby higher-grade prospect.

“Falcondo has implemented various measures to alleviate the negative impact of record high oil prices on its financial position,” Xstrata Nickel CEO Ian Pearce said. “These actions have resulted in approximately $20-million of cost savings.”

“The resumption of activities will be assessed based on market conditions, which are expected to improve towards the end of 2008,” he noted.

Prices for nickel, used to make stainless steel, have nearly halved since their peaks in 2007.