Buyers ready bids for BHP nickel cast-off

SYDNEY (Reuters) - BHP Billiton (BHP.AX) is on the verge of selling its Ravensthorpe nickel mine in Australia, ending a disastrous $2 billion foray into specialty nickel mining.

But who would want to buy one of BHP's costliest mistakes at a time when analysts forecast the world needs less, not more nickel? More parties than you think.

At least a half-dozen groups have kicked the tires around Ravensthorpe since it closed in January at the peak of the global commodities bust, with three serious contenders -- Canada's First Quantum Minerals (FM.TO), Australia's Minara Resources (MRE.AX) and Metallurgical Corp of China (MCC) (601618.SS)(1618.HK) -- emerging before the November 25 deadline for binding offers.

Ravensthorpe appeals on several levels to its suitors. Quantum is anxious to add nickel to its copper-weighted portfolio and Minara and Chinese state-funded MCC are banking on an eventual recovery in nickel prices.

A source with direct knowledge told Reuters on Friday that up to four parties are expected to submit bids.

"The company is anxious to have a resolution by the end of the year, one way or the other," added the source, who did not want to be identified because sale discussions were confidential.

A sale could yield BHP $850 million-$1 billion, according to several banking sources with knowledge of the sale process, while others put the figure at no more than $500 million.

"BHP has indicated it's not going to just give Ravensthorpe away, but it doesn't expect to get its full $2 billion out of it either," one of the sources said.

Bank of America Merrill Lynch is advising BHP.

Other less-likely buyers showing interest include one of Australia's richest men, mining magnate Clive Palmer, and Minmetals of Australia, both aggressively acquiring resource assets that need fixing up since commodities markets started rebounding mid-year.

Nickel, used mainly for stainless steel, is a long way off its 2007 peaks near $52,000 a tonne and sells for about $17,000 a tonne currently versus the $11,000 when Ravensthorpe closed on January 21.

Forecasts for consumption and prices down the road are mixed.

Some analysts have said prices will face more pressure in the coming months as inventories head for historical highs.

However, research group Antaike says real consumption may be better than expected, and could rise 39.7 percent in world No.1 stainless steel producer China this year.

"Nickel miners have reason be a little more optimistic, though they are not out of the woods yet," said Australia & New Zealand Bank commodities strategist Mark Pervan.

BHP SILENT

BHP itself has been silent on the sale process other than to say this week it was proceeding.

First Quantum, weighted toward copper mining in Africa, has told shareholders a goal this year was to diversify geographically and across commodities. Speculation swirled it was a possible buyer within days of Ravensthorpe shutting.

"First Quantum's got more than $800 million on hand and a nice cash flow from copper coming in and could easily snap up Ravensthorpe," said a banking source in Perth, where the potential buyers have been poring over Ravensthorpe's data.

Company executives could not be reached for comment.

First Quantum owns 80 percent of the Kansanshi copper-gold mine and all of the Fishtie and Bwana Mkubwa copper projects in Zambia among other mining assets. Its only Australian interest is a 16.32 percent stake in Equinox Minerals Ltd EQ.TO(EQN.AX), which operates Zambia's Lumwana copper mine.

Minara, Australia's only nickel miner employing similar extraction methods tried at Ravensthorpe, said on November 2 it was looking at funding options for Ravensthorpe.

MCC has also expressed interest, sources said.

The Chinese state-funded group is developing a nickel mine in neighboring Papua New Guinea at a cost of $1.7 billion, saying it has ready buyers waiting in China.

Palmer, who has employed Macquarie Bank and UBS to prepare a listing in Hong Kong for a suite of iron ore, coal and energy assets, said on Friday he was not interested in acquiring Ravensthorpe in its "present form," citing a desire for higher grade ores than Ravensthorpe is capable of delivering and costs of more than $100 million to tie it into Yabulu, another BHP nickel operation he bought earlier.

Andrew Michelmore, managing director of the Australian arm of Minmetals of China, this month would not rule out bidding for Ravensthorpe but warned the world was littered with failed laterite nickel projects.

China's Minmetals this year paid $1.4 billion for most of the assets of Oz Minerals Ltd (OZL.AX), including a nickel mine mothballed in the Australian state of Tasmania.

(Editing by Valerie Lee)