By Leia Michele Toovey- Exclusive to Nickel Investing News

Nickel has kicked off 2009 as the worst performing metal; declining 15 per cent in the first two months of the year, the most among LME traded metals. Inventories are well on their way to rise above 100,000 tonnes, the highest since June 1995.

Prices will remain under pressure. Stocks are rising, and demand is dropping sharply. Analysts predict that $8,850 per tonne is a good downside target, at noon GMT Tuesday, LME three-month nickel price was indicated at $10,360/560 a tonne. In early January it reached a two-month high of $13,550 ahead of the annual re-jigging of major commodity indices. But the market failed to hold on to its gains when the outlook returned to the bleak economic state of the world. More production cutbacks and closures will be necessary to have any influence on the metal’s stability.

China’s State Reserve Bureau (SRB) may buy as much as 30,000 tonnes of refined nickel from local smelters. The purchases will boost the country’s reserves, at a time where record low prices can be paid for the metal. The SRB, the commodity buyer for China, already bought 590,000 tonnes of primary aluminum and 200,000 tonnes of refined zinc in December-February from local smelters.  Nickel purchases will be made from major producer Jinchuan Group Ltd. The time frame of the stockpile purchase is not yet known, but nickel was conspicuously added to the national Nonferrous Metals Industry Revitalization Plan approved by the Chinese cabinet last week. The initial reserve proposal broached last week was for 30,000 tons of nickel, which amounts to 4.4 per cent of last year’s total domestic production, but the bureau may eventually buy less.

Company News 

Albidon Ltd, the Australian nickel producer backed by China’s Jinchuan Group Ltd., has suspended output at Munali, Zambia’s biggest nickel mine, after the rapid decline in the metal’s price rendered operations unprofitable. Albidon, which had agreed to sell all output from the $124 million Munali mine to Jinchuan, had forecast production of 10,500 metric tons a year from 2010 to 2017. Jinchuan, has offered a funding package to allow the company to continue to operate.

Vale Inco will cut about 900 jobs in its nickel business worldwide.  The reductions are focused on corporate, management and business-support functions. Vale, which bought Canada’s Inco Ltd. in 2006 to become the world’s second-biggest nickel producer, last quarter cut output and suspended some operations after prices dropped and demand fell from steelmakers amid the global credit crisis. On Feb. 20, Vale Chief Executive Officer  Roger Agneli said the company was negotiating a “restructuring” of its Canadian nickel business.

Mirabela Nickel Ltd, and Australian listed but Brazil focused explorer, has signed a commitment letter to raise $150 million from a senior secured term loan facility to develop its Santa Rita project in Brazil. The nickel explorer said the commitment is approved by Credit Suisse, Barclays, and West LB, who will pay $40 million each, while Caterpillar Financial Services will pay $30 million. The commitments to fund are conditional on Mirabela raising $133 million in additional equity. Mirabela Nickel also said it is in talks with another lender to raise up to an additional $40 million until March 20, making the total amount raised $190 million.

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