UPDATE 2-China's Ramu nickel mine in PNG restarts after attacks - embassy

Thu Aug 7, 2014 3:47am EDT

(Recasts with production resuming, Chinese embassy comment)

By Sonali Paul

MELBOURNE Aug 7 (Reuters) - A Chinese-owned nickel mine in Papua New Guinea has resumed production three days after an attack by armed villagers forced work to halt, a Chinese embassy official in the South Pacific country said on Thursday.

The $2.1 billion mine, forecast to produce 22,000 tonnes of nickel in 2014, is operated by Ramu NiCo, which is majority owned and run by Metallurgical Corporation of China Ltd (MCC) .

Equipment including nine excavators, a fuel truck and a lighting vehicle were burned and five Chinese workers were injured in the attack on Monday, the embassy said, confirming earlier media reports.

"The embassy strongly condemns these brutal attacks and makes urgent request to the PNG Government to take immediate and effective measures to prevent the violence from recurring and ensure the safety of the personnel and properties, and to bring those attackers to justice to deter such criminal acts," an embassy official said in an emailed response on Thursday.

"With the assistance of the police force, now the situation is under control and the mining production has been resumed."

Mining and energy projects are the major source of income for Papua New Guinea, but outbreaks of violence sparked by landowner disputes and environmental concerns are not uncommon.

At least four people were killed in 2009 when anti-Chinese sentiment erupted into violence and looting in the capital Port Moresby and second city Lae. The riots were sparked by a fight between local and Chinese workers during the construction of the Ramu project, according to media reports at the time.

One local media report said preliminary investigations found the latest attacks were spurred by concerns about the company's hiring policies for mine workers. Ramu NiCo has been focusing on training locals so they could work at the mine.

The development of Ramu was delayed by more than two years amid concern about the dumping of mine waste in the sea.

MMC, Ramu NiCo and minority owner Highlands Pacific did not respond to requests for comment on the situation.

Shares in Highlands Pacific fell 8.3 percent in a flat Australian share market.

LME nickel prices edged up about 1 percent after the shutdown was initially reported. Prices for the metal, used in stainless steel production, soared to their highest in more two years in May, above $21,000 a tonne, after a ban on ore exports from major producer Indonesia came into force in January.

Earlier this year, a chemical spill sparked riots in New Caledonia, which closed Vale's Goro nickel mine for about a month, adding to supply concerns.

Prices have since eased, to around $18,700 on Thursday, after Indonesia's new government took a softer stance on its export taxes for copper, turning investors cautious that it may also relax restrictions on nickel.

"Given the size of the Ramu mine is not very big, we don't think the shutdown would have a large impact in the international market right now," said an executive at a large Chinese trading firm which imports nickel regularly.

"LME nickel stocks are at record and more hidden stocks in bonded warehouses in Shanghai are continuing to go to the LME warehouses in Asia because of weak demand in China." (Additional reporting by Melanie Burton in Sydney and Polly Yam in Shanghai; Writing by Lincoln Feast; Editing by Michael Perry and Alan Raybould)