Vietnam approves $4.5 bln Posco steel mill - paper

HANOI, Jan 29 (Reuters) - The Vietnamese government has approved a plan by South Korean group POSCO (005490.KS), the world's third-largest steelmaker, to build a $4.5 billion steel mill with a local partner, a state newspaper reported on Tuesday.

The Thanh Nien (Young People) quoted the office of Prime Minister Nguyen Tan Dung as saying he had approved the plan to build the mill in the central province of Khanh Hoa in principle.

The government also gave POSCO the go-ahead to build a 1,000-megawatt thermal power plant to supply electricity to the mill, the report said.

POSCO's hot-rolled steel mill, a joint venture with Vietnam's top ship builder Vinashin and due to be completed by 2010, had raised environmental concerns in Khanh Hoa as it will be built near Van Phong Bay, close to the resort city of Nha Trang.

POSCO has already started building a $1.13 billion cold-rolled steel plant in the southern coastal province of Ba Ria-Vung Tau scheduled to begin production in 2009. (Reporting by Nguyen Nhat Lam; Editing by Michael Battye)