Xstrata said on Tuesday it had shut down a ferronickel mining and processing operation in the Dominican Republic for at least four months due to soaring energy costs and lower nickel prices. The Switzerland-based mining group said that its Falconbridge Dominicana (Falcondo) operation, which each year produced 29,000 tonnes or 2 per cent of the world's primary nickel, would be suspended until market conditions improved. The move is a sign of the pressure on mining companies' profit margins from rising costs such as energy, labour, chemicals and steel. Companies producing nickel and zinc are under particular pressure as the price of these metals has fallen sharply over the past few months. Charles Cooper, mining analyst at Evolution Securities in London, said Xstrata's decision had "rattled a few cages' and that other mining companies were likely to follow suit and suspend operations if nickel prices stayed low. For instance, he said BHP Billiton's Kambalda nickel mine in Western Australia was very high-cost and could be shut down until prices recovered. Xstrata said the Falcondo operation was suffering because its main energy source was oil, and it would be shut down for at least four months in order to adapt it to run on coal and look at other ways to reduce costs. Ferronickel is used in the production of stainless steel, and nickel prices have taken a knock over the past year due to a combination of lower demand from steel mills and high inventories. In the past 16 months, the global price of the metal has fallen 65 per cent. It is trading at about $18,000 per tonne on the London Metals Exchange, having slumped from over $51,000 per tonne last year. In the first quarter of this year, LME nickel prices averaged $29,120 per tonne. The average for the entire year is expected to settle at $24,330 a tonne. Xstrata said the majority of the 1,300-strong workforce at Falcondo would be used to carry out maintenance, and the company would continue to maintain rural roads and support community activities. It would continue generating power for the Dominican Republic's national grid from its 200MW plant on site. Minara, an Australian nickel miner, said earlier this month it had deferred a $273.5m nickel expansion plan due to high costs and a drop in half-year profits. Copyright The Financial Times Limited 2008