UPDATE: BHP Closing 1st Round Ravensthorpe Bids Today-Source

BHP Billiton Ltd. (BHP) is closing the first round of bidding for its idled Ravensthorpe nickel mine in Western Australia today, a person familiar with the matter said Monday.

BHP has been conducting a review since mid-year of the nickel laterite mine, which cost the company US$2.1 billion to build but was closed only a few months after commissioning last year.

The mine struggled with operational troubles, as have many other laterite projects that have high ore processing costs and have remained below expected capacity.

Media reports named Australian nickel miner Minara Resources Ltd. (MRE.AU), which already operates a laterite mine in Australia, and China's largest nickel producer, Jinchuan Group, as bidders. Australian mining magnate Clive Palmer, who in July bought BHP's Yabulu nickel refinery, has also been named as a potential bidder in the local press. Palmer was rushed to hospital on Sunday but his condition isn't life-threatening, Australian media reported.

"These companies would be the logical partners," the person said, adding that the number of potential bidders seemed "light on numbers."

"Minara is a good fit," said one person close to Minara, but declined to say whether Minara had bid.

BHP has written down the value of Ravensthorpe to zero, and it's not clear what sale price, if any, BHP would be asking, analysts said.

"BHP will be interested in offloading liabilities associated with the operation, such as the clean up. As we think has been the case for Yabulu, it's likely that very little cash would be changing hands," said UBS analyst Glyn Lawcock.

BHP faced a fierce backlash from the local community of Ravensthorpe after it shut the plant.

"BHP will want to make sure they let Ravensthorpe go to someone who can work the operation ok. They won't want to give it to someone where the deal ends up backfiring. They still feel ultimately responsible," said Lawcock.

The Yabulu refinery in Queensland had been modified to take feed from Ravensthorpe, which was set to produce 50,000 metric tons of nickel annually.

The sale process is likely to conclude by the end of the year, and so far has received plenty of "competitive tension," the person familiar with the situation said.

BHP earlier Monday declined to comment on the reports of the bidding process, and repeated earlier statements that it's considering all options for Ravensthorpe, including divestment.

Ravensthorpe's biggest struggle was a build of calcine from using salt water in the processing plant, said Lawcock, requiring the plant to be shut down "probably every month."

He estimated the cost of retrofitting the plant with alternative processing technology would be around US$1 billion.

-By Elisabeth Behrmann, Dow Jones Newswires; 61-2-8272-4689 [e-mail]