* Legal fight coming to a head over Solomon Islands nickel
* Japan's Sumitomo and Australia's Axiom set to make final
* Companies have different development plans for nickel
By James Regan
SYDNEY, June 12 A court ruling in the Solomon
Islands may finally unlock a large nickel deposit that
geologists have known about for half a century but have been
unable to exploit because of ownership changes and legal
Japanese giant Sumitomo Metal Mining and tiny
Australian explorer Axiom Mining are fighting over the
Isabel nickel laterite discovery and will submit final arguments
to the Solomon Islands High Court on June 23, following a court
case that has already run for 88 days.
A ruling is expected soon after and could lead to
development of the deposit, at a time when nickel prices have
soared following a ban in January on ore exports by Indonesia,
the world's biggest supplier.
Analysts estimate Isabel compares in size or grade to other
large South Pacific nickel mines, such as Vale SA's
Goro mine in New Caledonia and the China-owned Ramu mine in
Papua New Guinea.
Axiom, with a market value of just A$55 million ($52
million), would aim initially to ship unprocessed ore within two
years to hungry Chinese buyers to make nickel pig iron.
Sumitomo, a metals major and Japan's No. 2 copper producer,
has indicated it is interested in a larger, long-term
development to produce refined metal.
"We have a fast-track program to move to mining," Axiom's
managing director Ryan Mount told Reuters. "There's obviously
been a bit of a frenzy in the last six months to secure supply,
especially among nickel pig iron smelters in China."
Nickel prices on the London Metal Exchange have risen a
third so far this year, while the price of raw nickel ore has
quadrupled as Chinese buyers seek supplies, Mount said.
At these prices, the operation could generate around $50
million in cash flow a year, helping the company raise cash for
a potentially larger operation at a later date, he said.
Sumitomo said the deposit was still in the exploration stage
and the company, which has exploration rights over other
deposits in the region, would decide whether to undertake a
broad feasibility study.
"If we decide to conduct a feasibility study and make an
investment, it will take at least several years to develop,"
Sumitomo spokesman Masashi Takahashi said.
LONG TIME COMING
Solomon Islands, whose main exports include palm oil, copra,
timber and fish, has a GDP of about $3,450 per capita, putting
on par with Ghana and Pakistan. It has little history of mining
beyond start-and-stop exploitation of the Gold Ridge gold
deposit on neighbouring Guadalcanal Island.
Gold Ridge was worked briefly in 1999-2000 but closed when
civil unrest broke out between warring islands, restarting in
2011 only to be suspended again in April by current owner St
The Isabel deposit was discovered in 1956 by Canada's
International Nickel Co, now owned by Vale, but it left the
region in 1975 around the time of self rule. A second prospector
walked away in the 1990s amid weak nickel prices.
Sumitomo won an international tender for prospecting
licences in 2010. The licences were canceled in 2011 and similar
rights were later awarded to Axiom.
Mount, who has lived in the Solomon Islands for four years
and speaks the local language Pijin, said Axiom holds legal
pacts with landowners giving it direct ownership of 80 percent
of the deposit, while local landowners hold the balance.
Axiom's funds for the court case have come largely from a
series of capital raisings that has tripled its shares on issue
Sumitomo said before the case began that its exploration
rights had been canceled only a month after they were awarded,
with no reason given and no opportunity for comment.
A High Court ruling may still be subject to appeal, a source
close to the matter said.
($1 = 1.0654 Australian Dollars)
(Additional reporting by Yuka Obayashi in TOKYO; Editing by