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Anglo American Sees Barro Alto Nickel Output Cut Until 2016

Sept. 24 (Bloomberg) -- Anglo American Plc, the mining company with operations from Australia to Brazil, expects output at its biggest nickel project to remain curtailed until mid-2016 as it rebuilds two furnaces to fix design problems.

Anglo will produce between 20,000 and 25,000 metric tons of nickel at its Barro Alto facility in Brazil this year and will reach an average output capacity of 36,000 tons by June 2016, the head of nickel operations Walter De Simoni told reporters yesterday. The company, which expected to achieve full production at the project in late 2012, will fix one of the furnaces next year and the second in 2015, he said.

“We didn’t reach the maximum production capacity because we had some problems with the electric furnaces,” De Simoni said at a mining conference in Belo Horizonte, Brazil. “To correct this, we need to reconstruct the furnace.”

Anglo, based in London, started production at the $1.9 billion Barro Alto project in Brazil’s Goias state in March 2011, seeking to gain market share in the industrial metal used to prevent corrosion in stainless steel. Vale SA, the world’s second-largest nickel producer, also had furnace design problems at its Onca Puma project in northern Brazil. Vale is based in Rio de Janeiro.

Furnace Shutdowns

Each Barro Alto furnace will be shut for six to eight months during the reconstruction, De Simoni said, adding that the company is still assessing how much the renovations will cost. Anglo is contacting possible suppliers, he said.

Anglo fell 1.8 percent to 1,545 pence at the close in London. The stock has dropped 19 percent this year. Nickel for delivery in three months on the London Metal Exchange fell 1.3 percent to $13,770 a ton, extending its decline this year to 19 percent. The metal used in stainless-steel making is the worst performing industrial metal on the London bourse.

Prices will average $15,200 a ton this year as nickel supply exceeds demand by 60,000 tons, according to Societe Generale SA. Almost half of the nickel industry is losing money at current prices, Jim Lennon, commodities consultant to Macquarie Group Ltd., estimated Sept. 4.

To contact the reporter on this story: Juan Pablo Spinetto in Rio de Janeiro at jspinetto@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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