UPDATE: BHP Sells Ravensthorpe To First Quantum For US$340 Million

BHP Billiton Ltd. (BHP) said Wednesday it has agreed to sell the failed Ravensthorpe nickel mine to Canada's First Quantum Minerals Ltd. (FM.T) for US$340 million.

The sale is expected to be finalized in the first quarter of next year, and is subject to approvals from the Australian Foreign Investment Review Board and the West Australian Minister for Mines and Petroleum.

The sale marks the end of a costly venture into nickel laterite mining for BHP.

The Melbourne-based mining giant commissioned the mine in May last year after huge cost overruns and delays, but decided to shut it in January after plummeting nickel prices undercut the viability of the mine, damaging the miner's reputation and relations with the local community.

Ravensthorpe has a nameplate capacity of 50,000 metric tons.

"We are delighted that BHP Billiton and First Quantum have reached this agreement. This reflects the culmination of a thorough and exhaustive study into a range of future options for Ravensthorpe, which has delivered a positive outcome for BHP Billiton, First Quantum and the local communities of Hopetoun and Ravensthorpe," said Gerard Bond, BHP's acting president of stainless steel materials.

BHP has written the value of the operation down to zero, and will now reverse a previous pre-tax impairment charge of around US$630 million for the half year ended December 2009. After tax, the reversal will be US$441 million.

Attempts to work nickel laterite ore bodies using high pressure acid leach extraction--the process used at Ravensthorpe--have produced a number of failed attempts since the 1990s, including the Cawse and Bulong operations in Western Australia.

The sale to First Quantum--a cash-rich copper focused company with only early stage nickel interests--will be a disappointment to joint bidders and existing nickel laterite miners Minara Resources Ltd. (MRE.AU) and China Metallurgical Group Corp.

Minara, which operates the only surviving nickel laterite mine in Australia, Murrin Murrin, teamed up with MCC to secure funding.

MCC owns the US$1.4 billion Ramu nickel mine in Papua New Guinea that is in the latter stages of construction.

According to people familiar with the situation, final bidders also included Poseidon Nickel Ltd. (POS.AU), a small nickel developer chaired by Fortescue Metals Ltd. Chief Executive Andrew Forrest.

BHP's ability to secure the sale of an operation with such a difficult history is a positive signal for the nickel market in terms of longer-term demand.

 
   -By Elisabeth Behrmann, Dow Jones Newswires; 

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