Philippine, Chinese firms to build nickel plant

MANILA, Nov 28 (Reuters) - The Philippines' second biggest mining firm Atlas said on Friday it will build a nickel-cobalt leaching plant southwest of the capital with its partners in a profitable nickel mine and China's Jiangxi Rare Earth & Rare Metals Tungsten Group.

Atlas Consolidated Mining and Development Corp (AT.PS) said in a statement to the stock exchange it will build the plant near its Berong nickel mine on Palawan island, dropping an earlier plan to build a similar facility in China.

"In terms of logistics, it would be much better to build the plant in the Philippines," Martin Buckingham, chief financial officer at Atlas, told Reuters. He added the nickel facility may be completed within 2009.

Atlas did not say how much the leaching plant will cost but said China's Jiangxi would fund the construction in exchange for a long-term laterite ore supply agreement.

"In the current economic climate, added value processing of ore is the optimum way forward for nickel producers, eventually to replace direct ore shipping," said Atlas.

The plant will have an initial capacity of 3,000-5,000 tonnes of mixed nickel-cobalt hydroxide product a year, which will eventually be increased to up to 40,000 tonnes.

Nickel producers in the Philippines are investing to have the ability to process laterite ore from local nickel mines instead of shipping the ore to clients following a drop in Chinese demand.

London-listed Toledo Mining (TMC.L) holds majority interest, or 56.1 percent, in the Berong deposit, with European Nickel (ENK.L) owning 18.7 percent. The rest is held by Atlas.

The Berong project, potentially the world's fourth-largest nickel laterite resource, is shipping ore with an average grade of around 1.5 percent to a unit of BHP Billiton (BHP.AX) (BLT.L) and to producers in China. Toledo said in August it had signed a deal with Jiangxi to develop a separate nicke-cobalt leaching plant at the Ipilan/Celestial nickel laterite deposit also in Palawan.

That plant will have an annual capacity of 40,000 tonnes mixed nickel-cobalt hydroxide, with the entire output to be sold to Jiangxi under a long-term supply deal.

(Reporting by Manolo Serapio Jr.; Editing by Kim Coghill)