June 23, 2011 / 4:39 AM / in 7 years

UPDATE 1-Minmetals sees potential restart, sale of nickel mine

* Australian nickel mine shut during financial crisis could restart

* Minmetals says open to potential buyers

* Nickel price more than double from when mine was mothballed but slipping (Adds details, quotes, nickel price data)

By James Regan

SYDNEY, June 23 (Reuters) - China’s Minmetals has received interest from outside parties to operate its mothballed Avebury nickel mine in Australia, MMG, the company’s Australian subsidiary, said on Thursday.

The mine was shut down at the height of the global financial crisis due to low world nickel prices, which fell below $10,000 a tonne, less than half the current price.

“In recent months MMG has received interest from other potential partners and operators with a stated interest in the mine,” MMG said in a statement.

“As a result, MMG will conduct a formal expression of interest process for participation in, or potential sale of, Avebury,” it said.

Mining companies, including Vale , Xstrata , AngloAmerican and Sherritt International have been racing to construct new mines mostly to feed demand for nickel to make stainless steel, hoping prices will continue to strengthen in step with projected consumption growth.

But this year’s expected supply deficit of around 30,000 tonnes — against consumption of 1.59 million tonnes, could reverse into a 25,000-tonnes surplus in 2012 building to an 80,000-tonne surplus in 2013, according to forecasts by BNP Paribas.

Nickel prices peaked at just under $29,500 a tonne in late February and have largely been on a downslope since. LME three-month nickel currently trades for around $22,000 a tonne.

The Avebury mine, on the island of Tasmania, was slated to yield 8,500 tonnes of nickel a year — in a world market of around 1.3 million tonnes — all going to Chinese refiner Jinchuan Group under an exclusive supply pact before being shut.

Co-production of large volumes of arsenic in the mining stage of the nickel has also presented challenges for the operation in the past.

MMG said it will consider “all proposals to develop or acquire Avebury and believes this will increase the likelihood and accelerate the timing of the mine being re-commissioned in the medium-term.”

Another nickel mine shut in Australia due to low prices is scheduled to resume production.

First Quantum Minerals is in the final stages of rehabilitating a nickel mining operation in Ravensthorpe, Australia, which it bought from BHP Billiton in 2009.

At full speed, the company expects the mine to yield around 39,000 tonnes of nickel a year. (Editing by Ed Davies)

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