UPDATE 1-S'tomo Metal Mining to spend $1.9 bln in nickel-paper

(Updates with company comments, background)

TOKYO May 21 (Reuters) - Japan's Sumitomo Metal Mining Co (5713.T) plans to spend about 200 billion yen ($1.9 billion) to develop a nickel mine in the Solomon Islands in the South Pacific, the Nikkei business daily reported on Wednesday.

A company official said the report was based on speculation.

"We have been doing research in that the area, but we still haven't started a feasibility study," he said.

The Nikkei said that the firm plans to build a refinery in the island nation and start processing nickel ore into nickel metal with 55 percent purity around 2013, to be shipped to its plant in Japan for further processing.

The planned annual output of around 30,000 tonnes is expected to be sold mostly to Japanese customers as bullion, the paper said.

Sumitomo Metal had acquired 100 percent rights to three nickel mines on the Solomon Islands in 2005, and was granted a mining licence for one of the mines that year.

The company, which aims to be among the world's top five nickel producers in the next decade, has several overseas nickel development projects.

Its 10,000 tonnes-a-year Coral Bay nickel plant in the Philippines is scheduled to come fully on line in September 2009.

Coral Bay, 54 percent owned by Sumitomo Metal, was building a second plant at the site on Palawan Island with the aim of doubling nickel capacity to 20,000 tonnes a year using the Japanese company's technology to recover nickel from low-grade nickel oxide ore.

The expansion at Coral Bay is scheduled to be completed in 2010.

Its 60,000 tonnes-a-year Goro project in New Caledonia, in which Sumitomo Metal Mining and Mitsui & Co (8031.T) own a combined 21 percent stake, is set to start production by early November.

In addition, Sumitomo Metal's 30,000 tonnes-a-year Taganito project in the Philippines is slated to be launched in 2012.

As of 0043 GMT, shares in Sumitomo Metal were up 2.1 percent at 1,999 yen from Tuesday's close. ($1=103.62 yen) (Reporting by Taiga Uranaka and Chikafumi Hodo)