MELBOURNE, Dec. 9 -- Canadian miner First Quantum Minerals (FM.TO: Quote) has agreed to buy BHP Billiton (BHP.AX: Quote) (BLT.L: Quote) closed Ravensthorpe nickel mine for $340 million, paving the way to revive 5 percent of world nickel capacity.
First Quantum said Ravensthorpe, combined with its recent commitment to build a project in Finland, would make it one of the world's leading nickel producers, but it declined to give a precise time-frame for restarting the operation.
BHP spent about $2.2 billion to build the mine but shut it in January, just months into its life as nickel prices dived amid global financial crisis. The mine also suffers from technical glitches linked to problematic laterite-type ore that analysts say could cost hundreds of millions of dollars to fix.
"We are committed to restarting Ravensthorpe which we believe we can successfully achieve within a realistic time-frame," First Quantum Chairman and CEO Philip Pascall said in a statement.
He did not say how much it would cost, but said the Canadian firm's strong balance sheet and cash flows would give it time and flexibility to fix the commissioning and operational issues.
A fund manager said the outcome was good for both companies.
"First Quantum have paid a price where it should be able to make the asset work after additional capital expenditure," said Tim Schroeders, a portfolio manager at Pengana Capital. "And BHP are able to walk away and pocket a reasonable amount of cash in that transition, rather than have a dormant asset on their balance sheet."
First Quantum and BHP said on Wednesday they expected to complete the sale by end-March 2010, subject to approvals from Australia's Foreign Investment Review Board and the West Australian state government, which wants the mine to reopen.
BHP said it would reverse previously recognised impairment costs of $441 million post-tax from June 2009 as a one-off in its first-half results for this year, largely reflecting closure and rehabilitation costs that it will now not incur.
In February BHP took a $3.4 billion writedown on Ravensthorpe and the accompanying Yabulu refinery in the east coast state of Queensland, to value them at zero. Yabulu has since been sold to Australian mining entrepreneur Clive Palmer.
Another contender for Ravensthorpe was a joint bid from Australian nickel miner Minara Resources Ltd (MRE.AX: Quote) with Metallurgical Corp of China (MCC) (601618.SS: Quote)(1618.HK: Quote), sources have earlier told Reuters.
BHP declined to comment on who the contenders were.