BHP sells closed nickel mine

MELBOURNE - First Quantum Minerals, a copper producer in Africa, will buy BHP Billiton's shuttered Ravensthorpe nickel mine for US$340 million ($479 million) and aims to restart operations as part of a plan to diversify production.

"We are committed to restarting Ravensthorpe, which we believe we can successfully achieve within a realistic timeframe," said Philip Pascall, chief executive officer of Vancouver-based First Quantum.

Plunging prices forced BHP in January to close the US$2.2 billion mine in Western Australia, eight months after it opened.

Ravensthorpe is the second nickel project purchase in the past two years by First Quantum's Pascall, who's betting on a rebound in global demand from stainless steel mills.

"Low-cost, high-grade nickel sulphide deposits are running out of ore, underpinning the price," Alex Passmore, head of metals and mining at Paterson Securities, said from Perth.

Ravensthorpe "requires A$300 million to A$400 million to get it up and running in addition to the purchase price", he said.

Nickel prices in London have gained 37 per cent this year, and Credit Suisse Group AG last month increased its forecast for 2010 and 2011 by as much as 25 per cent.

World nickel consumption outpaced output by 9400 metric tonnes in September, resulting in a third monthly production deficit, the International Nickel Study Group said last month.

First Quantum agreed in April, 2008, to buy Scandinavian Minerals for about C$281 million ($264 million) to add a nickel mine in Finland. The company's strategy is "built on discoveries and acquisitions".

The Ravensthorpe open cut mine had reserves of 235 million tonnes of nickel ore, with capacity to produce 50,000 tonnes a year of contained nickel and 1400 tonnes of cobalt.

- BLOOMBERG