UPDATE: MCC Seeks Joint Bid With Minara On Ravensthorpe

China Metallurgical Group Corp., or MCC, has approached nickel miner Minara Resources Ltd. (MRE.AU) to launch a joint bid for BHP Billiton Ltd.'s (BHP) idled Ravensthorpe nickel mine, a person familiar with the situation said this week.

Minara and MCC have emerged as strong contenders given their technical experience with nickel laterite mines and the pair teaming up would significantly lessen competitive tension in BHP's attempt to sell the failed operation.

Final bids are due Wednesday, and aside from MCC and Minara, Poseidon Nickel Ltd. (POS.AU) and Canada's First Quantum Ltd. (FM.T) remain in the running, a second person familiar with the sale process said.

Poseidon has a market capitalization of only A$44 million and is lacking the financial muscle to purchase Ravensthorpe. First Quantum is cash-rich but is focused on copper production and only has early-stage nickel projects.

BHP is seeking up to A$500 million for the mine but the acquirer would also have to invest substantially to improve the operation's performance as well as restart costs.

"There's a disconnect between BHP's internal thinking about the price versus reality. Ravensthorpe is a very poorly defined ore body and the company has written its value down to zero. BHP isn't having the kind of auction they want," the first person familiar said.

A BHP spokeswoman reiterated that the company was investigating divestment, restart or a permanent closure.

Ravensthorpe cost BHP US$2.1 billion to build and was commissioned at a time of plummeting nickel prices. Failing to turn a profit, BHP mothballed Ravensthorpe after only a few months of operation.

Minara has technical expertise it can apply at Ravensthorpe, having already successfully revived one troubled nickel laterite project at its Murrin Murrin mine in Western Australia using a high-pressure acid leach process.

However, it needs a partner to secure funding and was planning to team up with China's Jinchuan Group, which earlier this month exited the bidding.

Minara has confirmed its participation in the sale.

Minara has a market capitalization of A$969 million and has a weighty backer in the form of international commodity trader Glencore International AG with a shareholding of 70.6% but it's unlikely Glencore would want exposure to an asset as risky as Ravensthorpe.

MCC operates the US$1.4 billion Ramu nickel venture, which is due to finish construction by the end of the year. Forecast to produce 31,150 metric tons a year of nickel, Ramu is also a high-pressure laterite processing venture and MCC could use expertise gained in its construction to speed up the revamp of Ravensthorpe.

MCC is making increasing inroads in Australia's resources sector. Last year it bought the Cape Lambert Iron magnetite project in the Pilbara region in a A$400 million deal and took a 20% in Citic Pacific's US$3.8 billion Sino Iron project at Cape Preston.

Last week MCC agreed to back Australian mining magnate Clive Palmer's -- who was also an early bidder for Ravensthorpe -- A$7.5 billion China First Coal project in Queensland.

-By Elisabeth Behrmann, Dow Jones Newswires;

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