BHP plans big uranium mine

SYDNEY (Reuters) - Global miner BHP Billiton <BHP.AX> <BLT.L> is looking to develop a big uranium mine in western Australia, the company said on Friday, in another sign that the country is gearing up to power a surge in global nuclear power.

But BHP declined to comment on a separate newspaper report that it was in talks to sell an Australian nickel refinery.

BHP said it had submitted plans to environmental authorities to develop the Yeelirrie uranium deposit with a view to starting construction in 2011 and initial production in 2014, subject to government and BHP board approvals.

Yeelirrie is Australia's second-biggest unmined uranium deposit.

Australia's uranium industry has been hamstrung since the early 1980s by political hostility to the nuclear fuel, but long-standing bans on new mines by various state governments are gradually being lifted in the face of economic crisis.

The national government is also encouraging more uranium mining and courting new export business in China. Australia has 40 percent of the world's recoverable uranium and is the world's second-largest supplier behind Canada.

Russia, China and India are all anxious to buy Australian uranium to develop civilian nuclear energy.

Australian resources minister Martin Ferguson told state radio on Friday that the government supported new mine developments and expected the BHP project to get a green light.

"In my opinion Yeelirrie will go forward, subject to appropriate regulatory approvals. The demand for uranium is good, it's going to continue to grow, it's one of the commodity prices that's actually held itself up relatively," Ferguson said.

"I am convinced that BHP Billiton wants to proceed with the development of this export opportunity, especially in this tough economic period," he said, adding Australia must be well placed to meet demand for uranium from new nuclear power plants.

BHP also owns Olympic Dam uranium mine in south Australia, the world's largest uranium deposit, which it plans to expand.

Separately, the Australian Financial Review newspaper said that BHP was in talks with Australia's Gladstone Pacific Nickel <GPNG.L> to sell its Yabulu nickel refinery in Queensland state.

"Yabulu is the subject of a future options study which is looking at all options, including potential divestment, indefinite suspension or continuing operations," BHP said in a separate statement. "That will be complete in the first half of the year," it added.

The paper said Gladstone did not have the capital to buy Yabulu but was supported by Australian mining magnate Clive Palmer and joint venture partner China Metallurgical Construction Corp.

The future of Yabulu has been the subject of speculation since BHP began idling nickel facilities in Australia due to falling prices for the metal.

The paper said BHP would not want to close Yabulu given cost concerns and the impact on jobs, and would prefer to sell it.

(Reporting by Jonathan Standing and Denny Thomas; Editing by Mark Bendeich)

Article Published: 22/05/2009