Ravensthorpe to Cost US$2.2 Billion

A revision of estimated capital costs for the Ravensthorpe laterite nickel project in Western Australia now gives the project a price tag of US$2.2 billion.

Owner BHP Billiton (BHP-N, BLT-L, BHP-A) said the increased estimate came as a result of much higher labour and materials costs, which are in severe shortage in the booming mining industry in Western Australia. A BHP statement said “the project was still well positioned to deliver positive results,” presumably as the result of higher nickel prices.

Those prices jumped on the news that Ravensthorpe — slated to produce 50,000 tonnes nickel and 1,500 tonnes cobalt annually — would now be delayed until the first quarter of 2008. London nickel prices were fixed at US$34,600 per tonne (US$15.69 per lb.) on Dec. 1.

The previous cost estimate was US$1.3 billion, and production had been scheduled for 2007. Ravensthorpe’s original cost estimate was US$1.1 billion. BHP said construction was 73% complete, implying that it had already spent or committed US$1.6 billion on the project.

The project is an open-pit mine with a high-pressure acid-leach plant, processing a dry laterite ore. Several Australian projects using the same technology hit technical and financial problems in the late 1990s.

Similarly, the Goro project in New Caledonia, owned by Inco (N-T) has had a series of cost overruns. Currently projected to cost US$1.9 billion, Goro is under further study by Inco, which may revise estimates again.