Minmetals could restart Avebury nickel mine


China's Minmetals said it is conducting a review that could lead to a restart of its Avebury nickel mine in Australia, becoming the second miner in the country to consider reactivating production shut due the global financial crisis.

"While this review is not an indication that operations at Avebury will be recommenced imminently it does demonstrate MMG's commitment to the project and the region," MMG, Minmetals' Australian subsidiary said on Wednesday.

Several Australian nickel mines were shuttered in 2008 when the nickel prices dropped below the cost of production, making operations uneconomical.

Prices have since recovered, with the London Metal Exchange three-months contract MNI3 last indicated at $25,900 a tonne, almost three times the recession low of $8,850 in October 2008.

In the first quarter, nickel prices rose 34.9 percent as steel mills appeared to replenish stocks, making nickel one of the top LME performers. Nickel is used in stainless steel manufacturing.

"In tandem with this review, MMG will continue to monitor nickel prices as part of its longer term decision around recommencing the operations at Avebury," it said.

The former owner of the Avebury mine, Oz Minerals (OZL.AX: Quote), along with Mincor Resources (MCR.AX: Quote), BHP Billiton (BHP.AX: Quote), Xstrata (XTA.L:Quote) and Norilsk GMKN.M all idled mines in Australia as the bottom fell out of commodities markets.

Mincor this week told Reuters it could be the first to resume operations if a study due for completion next month supports reactivating its Miitel mine.

"All nickel have to do is hang its star on steel production, which is increasing rapidly, creating more need for nickel," Eagle Mining Research analyst Keith Goode said. "Nickel's prospects have improved greatly since the crisis passed."

The Avebury mine, on the Australian 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.

The pact with Jinchuan still stands and will be reactivated when the mine reopens.

MMG said it will spend around A$3 million ($2.7 million) on the review. ($1=1.076 Australian dollar) (Editing by Balazs Koranyi)

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