BHP, Antam eye Indonesian nickel mine project

SYDNEY Feb 14 (Reuters) - BHP Billiton Ltd./Plc. (BHP.AX) (BLT.L), the world's third-largest nickel producer, has agreed to jointly study development of a mine and metal processing plants in Indonesia with local miner PT Antam Tbk (ANTM.JK) (ATM.AX). The agreement calls for a joint study into the development of the Buli nickel deposit and related processing facilities on Halmahera Island in northern Indonesia, Antam said.

No capital cost figures were disclosed.

The move was in line with Antam's strategy of moving into downstream nickel processing, it said.

Prices for nickel, primarily used to give stainless steel shine, have soared to record highs on limited supplies against annual world consumption of around 1.3 million tonnes, leaving producers scrambling for new supply sources.

Nickel MNI3 hit a peak of $38,950 a tonne last month. It traded at $36,000 on Wednesday and is up more than 10 percent so far this year.

London-based European Nickel (ENK.L) on Monday signed a product offtake agreement with BHP covering a projected 20,400 tonnes of nickel from its Caldag project in Turkey starting next year.

The partnerships come as BHP faces ballooning construction costs in Australia at its 100 percent-owned Ravensthorpe nickel mine project, which are up 64 percent to $2.2 billion due to labour shortages and equipment delays.

BHP's main sources of nickel are in Australia and Colombia.

Antam's nickel sales in 2006 nearly doubled from the previous year due to the start of the company's third smelter in May.

Antam, 65 percent owned by the Indonesian government, expects nickel production in 2007 to be around 20,000 tonnes.

BHP share were up 0.8 percent at A$28.80 at 0059 GMT, in step with gains in the S&P/ASX200 index .AXJO. ($1=A$1.29)