By Leia Michele Toovey- Exclusive to Nickel Investing News

The price of nickel used in stainless steel has slumped more than 60 per cent from the beginning of this year and some mining companies have been forced to cut back output or delay projects as prices have fallen below the marginal cost of production. Nickel MNI3 closed last week at US$8,850 per tonne on the LME, a five-year low, and down 82 per cent from last year’s high. London nickel futures dropped 5 per cent on Monday, tracking steep falls in other metals as the weakening global economic outlook dragged down industrial raw materials. On Tuesday, nickel advanced to an intra-day high of US$11,750 a tonne. Nickel prices bounced as much as 5.3 per cent on Wednesday to track other industrial metals higher as global equity markets jumped and provided positive sentiment.

Russian miner Norilsk Nickel has an overwhelming response to its offer of share capital, receiving tenders for nearly 14 times more shares than were up for grabs. The world’s largest nickel miner received applications totaling 110,530,008 shares; the company has said it would buy back up to 7,947,000 shares. “Shares will be purchased from shareholders on a pro rata basis to the number of shares tendered in the applications received,” Norilsk said in a statement. The company made no mention of an injunction by a Siberian court freezing the buyback pending a final ruling in a case brought by one-quarter shareholder United Company RUSAL. “We still have not seen any court documents,” a Norilsk spokesman said on Wednesday. The buyback, announced on August 22, is at a price of 6,167 roubles per share. If all the shares are bought, it would cost Norilsk US$1.79 billion.

BHP will increase nickel production at its Australian Ravensthorpe mine by 5,000 tonnes in the upcoming January- June period.  The mine, which started production in 2007 about nine months behind schedule, cost about $2.2 billion to build and is one of the largest nickel-making facilities in the world. Since starting, world nickel prices have more halved, pressuring BHP and other miners on costs and prompting predictions that mines will decrease rather than increase output. In a presentation to analysts visiting the mine in Western Australia on Wednesday, BHP said about 85 per cent of the operating costs were priced in Australian dollars, providing a buffer against falling US dollar nickel prices. BHP Chief Financial Officer Alex Vaneslow has said Ravensthorpe needed a nickel price of between $5 and $8 a pound to be cash positive at full production.

The sharp drop in the nickel price has forced nickel miner Minara Resources to embark on ambitious capital raising plans to allow it to stay afloat amid volatile markets. The company will conduct a pro rata rights issue to raise about $210 million before costs. In a statement, Minara claimed “the decline in the nickel market and the significant increase in the sulphur price have put pressure on Minara’s cash flow, resulting in the need to raise additional capital.” Funds raised will be used to the repay short term funding, to fund committed capital expenditure, and to provide the company with working capital for operations over the next 18 to 24 months.

French nickel producer Eramet will be adjusting its 2008 nickel production. In light of the global economic slowdown, the company will decrease output and deliveries 13 percent to 52,000 tonnes. The company has seen nickel demand in the third quarter drop off due to a reduced production of stainless steel. Fortunately, Eramet is benefiting from its fourth quarter hedging program, with 3,200 tons of nickel hedged at an average price of $23,750 per tonne. During the third quarter, Eramet Nickel’s hedging program applied to about 4,500 tons at an average price of $22,100 per tonne. Nickel deliveries reached 10,066 tonnes in the third quarter, down 9 per cent year-on-year. Over nine months, deliveries stood at 38,288 tonnes, down 3.1 per cent in the same period in 2007.

 Jinchuan Group, China’s largest nickel producer, said it has decided to reduce its full-year nickel output target to 100,000 tonnes, down 16.7 per cent from the previous target, in order to help support market prices. Some producers in Yunnan province and Chongqing municipality have closed or reduced their output, while stocks of nickel ore in Chinese ports are estimated at about 10 million tonnes, it said. It also projected global output of nickel to decline by over 100,000 tonnes this year.

PT International Nickel Indonesia Tbk (INCO) one of the world’s top nickel producers, said its nine-month net profit slumped 62 per cent to $369.1 million due to a sharp drop in nickel prices and slower sales. Inco said in a statement that it sold nickel at an average price of $19,803 a tonne in the first nine months of 2008, down 37.8 per cent from $31,874 a tonne in the same period last year. The firm sold 57,171 tonnes of nickel in matte form in the first nine months, down from 59,461 tonnes a year ago. Production of nickel in matte form in the first nine months fell 3.25 per cent to 56,227 tonnes, from 58,119 tonnes a year ago, due mainly to maintenance work at one of the firm’s furnaces which led to a shutdown in the third quarter.