UPDATE 2-BHP sells Yabulu refinery, to take $675 mln hit

* BHP offloads Yabulu nickel refinery to mining magnate

* Buyer Clive Palmer says refinery can be expanded

* Output was cut in January

By James Regan and Bruce Hextall (Adds details, quotes)

SYDNEY, July 3 (Reuters) - BHP Billiton (BHP.AX) (BLT.L) retreated further from high-cost nickel operations on Friday, announcing the sale of its Yabulu nickel refinery in Australia to a local mining magnate.

The future of Yabulu, in the northeast Queensland state, had been in doubt since January when BHP Billiton shut its Ravensthorpe nickel mine in Western Australia that supplied the refinery with concentrate to process into nickel and cobalt.

Neither BHP Billiton nor the buyer, billionaire Clive Palmer, disclosed the sale price but it will result in writedowns totalling $675 million for BHP Billiton.

"It's a good buy and the replacement value would be over A$2 billion ($1.6 billion)," Palmer told Reuters, adding there was "plenty of opportunity to expand when metals markets improve."

Palmer also said unlike some other nickel-making operations in Australia, Yabulu was "currently profitable" and no longer under threat of closing.