UPDATE 1-PNG stops Ramu nickel project over safety

(Updates with PNG mines sourcing, Highlands comment)

SYDNEY, July 28 (Reuters) - Construction of Papua New Guinea's Ramu nickel mine and processing plant has been stopped due to health and safety concerns, PNG's chief mines inspector said in a statement on Tuesday.

Work on the project, majority owned by Chinese state-owned China Metallurgical Construction Group Corp, was disrupted last month by fighting between workers after an industrial action.

PNG chief mines inspector Mohan Singh ordered a halt to Ramu operations on July 21 and the withdrawal of everybody from the site on health and safety grounds, said the statement.

Singh directed the company to rectify defects, said the statement, but it did not detail the defects.

The project, estimated to cost $1.7 billion, is scheduled to start production in late 2009 and is designed to supply stainless steel mills in China.

Australia-listed Highlands Pacific Ltd (HIG.AX), which owns 8.56 percent of the project, said the stoppage would not affect construction time.

"The company recognises that the health and safety aspects of the operations are of paramount importance," Highlands managing director John Gooding said in a statement.

"As reported in our quarterly report, Ramu is on time and on budget and we do not anticipate these initiatives impacting on the project timetable," said Gooding. (Reporting by Michael Perry; Editing by James Thornhill)