Announcements reported here are from the late October to mid-November time frame and only include statements from larger producers. Mid-tier and smaller companies also announced numerous production cutbacks, mine shutdowns and project deferrals; and junior companies are struggling to stay afloat as funding for their exploration and development projects has all but dried up.

On October 31, Vale, the world’s largest iron ore miner, said it would reduce its iron ore production rate by 30 million mt/y, about 10% of its total, effective immediately. In its statement, the company noted that steel companies around the globe were cutting production by about 20% from 2007 levels. With steel-making being the only market for iron ore, iron ore demand has also dropped sharply. The Vale production cuts are being made at some of its mines in Minas Gerais state, Brazil, where its higher-cost operations are located. Two pellet plants, representing about 20% of Vale’s capacity, have been shut down.

Also, Vale’s manganese ore and ferroalloy operations in Brazil are being shut down during December 2008 and January 2009; its Dunkerque ferroalloy plant in France will be shut down until April 2009; and its plant at Mo I Rana, Norway, will undergo extended furnace maintenance until June 2009. These changes imply a production cut of 600,000 mt of manganese ore and 90,000 mt of ferroalloy.

Vale is also reducing nickel production in Indonesia and China and aluminum and kaolin production in Brazil.

Regarding capital spending, the Vale statement said that, given the company’s confidence in the long-term fundamentals of the markets for minerals and metals, it had not changed its plans for capital expenditures of $14.8 billion in 2009.

On November 10, Rio Tinto announced that it also is reducing iron ore production as a result of reduced demand. Cutbacks will total 10% of production at the company’s mines in Western Australia. Rio Tinto CEO Tom Albanese made special note of the drop in iron ore demand from China, saying, “We believe this will be a short, sharp slowdown in China, with demand rebounding over the course of 2009, as the fundamentals of Chinese economic growth remain sound.”

Only BHP Billiton among the big three iron ore mining companies said it would not cut production. In a November 15 interview by The Australian newspaper, BHP Billiton Chief Commercial Officer Alberto Calderon said that about 5% of its planned 2008 iron ore shipments had been deferred by customers. However, Calderon said, BHP would not cut production. “I am adamant. You don’t cut production. There’s no reason for a low-cost producer to cut production.”

With zinc prices falling nearly 47% this year, Teck announced it is cutting refined zinc production at its
Trail, B.C. refinery by as much as 5,000 mt/month. (Photo courtesy of Teck).

Xstrata Nickel announced on November 13 plans to shut down ahead of schedule its Craig and Thayer-Lindsley nickel mines in the Sudbury district of Ontario, Canada. Both mines are approaching the end of their productive lives. They will be replaced by the new, lower-cost Nickel Rim South and Fraser Morgan mines, both in advanced stages of development. Xstrata Nickel Chief Executive Ian Pearce said, “Xstrata Nickel is taking decisive action during a period of lower nickel prices to reduce the cost of nickel production in Sudbury and ensure that our business remains robust throughout the economic cycle. In the current environment, these older, higher-cost operations are no longer viable.”

In South Africa, Xstrata Alloys and Merafe Resources announced on November 10 the temporary shutdown of six furnaces, representing 500,000 mt/y of annual ferrochrome production, approximately 29% of the Xstrata-Merafe Chrome Venture’s total available capacity. Production from three furnaces at Rustenburg, two at Lydenburg and one at Wonderkop will remain suspended until further notice.

Alcoa announced on November 11 that it was cutting its aluminum production by 350,000 mt/y and that work had been suspended on an expansion at the Wagerup alumina refinery (60% Alcoa) in Western Australia. On October 24, the company had announced a 25% cutback at the Point Comfort, Texas, USA, alumina refinery (also 60% Alcoa), representing about 550,000 mt/y of alumina production.

Freeport-McMoRan announced on October 21 that it was deferring or considering deferring capital spending on several copper projects, including incremental expansions at its Sierrita and Bagdad mines and the planned restart of its Miami mine in the United States, expansion at El Abra in Chile, and various development projects at its Grasberg operations in Indonesia. The company also said that it was deferring exploration expenditures and could potentially curtail copper production at high-cost operations.

Subsequently, on November 10, Freeport said that, in response to the recent sharp decline in molybdenum prices, it was reducing production at its Henderson primary molybdenum mine in Colorado by 25% and suspending construction activities toward a planned restart of its Climax molybdenum mine, also in Colorado. The cutback at Henderson represents about 10 million lb/y of production. Approximately $150 million of $500 million in planned spending for the Climax project had been incurred through October 31, and remaining near-term commitments totaled $50 million. The project was previously expected to begin production in 2010, ramping up to a rate of 30 million lb/y of molybdenum. Once a decision is made to resume construction, the project could begin production within 12 to 18 months.

News reports from Chile indicated that Codelco, the world’s largest copper producer, would trim some production and was reviewing spending plans, while news reports from China stated that Chinese copper refineries had instituted production cutbacks ranging up to 33% of capacity at individual refineries.

On November 20, Teck Cominco announced that it was reducing refined zinc production by about 4,000 to 5,000 mt/month at its Trail, British Columbia, metallurgical complex and reducing its planned capital spending for 2009 to about $250 million from a previously forecast $650 million for 2008. The company also said it had elected to withdraw from the Petaquilla copper project in Panama and had reached an agreement to sell its 60% interest in the Lobo-Marte gold project in Chile to Kinross Gold for $40 million cash and $70 million in Kinross shares. Kinross is also acquiring Anglo American’s 40% interest in the Lobo-Marte project. The Teck actions were part of a more comprehensive plan to reduce the company’s debt.

Cameco Corp., the world’s largest uranium miner, noted in a November 11 statement accompanying release of its thirdquarter results that, “The capital market for debt, for Cameco and most other companies, has effectively shut down. In response, the company is re-examining its expenditures during the current budget planning process.” Cameco’s revenue stream from generators of nuclear power is generally independent of the state of the global economy. However, the statement said, “During this period of uncertainty, Cameco will proceed in a prudent manner. Growth will take place but at a slower and more measured pace. We will look for opportunities to reduce costs and defer projects that cannot be funded internally.”