Vale raises Brazil nickel project capex 60 pct

By Andrei Khalip

RIO DE JANEIRO, April 25 (Reuters) - Brazil's mining company Vale said on Friday rising costs and impact from gains in the local currency made it lift the total investment estimate in the Onca Puma nickel project by about 60 percent to $2.3 billion.

Vale (VALE5.SA: Quote, Profile, Research)(RIO.N: Quote, Profile, Research) investor relations director Roberto Castello Branco told a conference call with analysts that a third of nearly $900 million in the capex increase for the Amazon project stemmed from the currency effect and the rest from rising costs of equipment and electromechanical assembly.

"This cost increase is in line with the environment the mining industry is facing, where currency volatility and input prices are rising," he said, expecting no immediate impact on Vale's $59 billion overall investment plan through 2012.

"At this point in time we are not foreseeing any change in the capex program for next five years," Castello Branco said.

Onca Puma, with a planned 58,000 tonne annual ferro-nickel capacity, is scheduled to start producing in the first half of 2009. Investment this year should total $581 million.

The estimate for Vale's 60,000 tonnes a year Goro nickel project in New Caledonia remained unchanged from last year's projection of $3.2 billion. Goro, which will receive $723 million in investment this year, is scheduled to go on stream at the end of 2008.

Vale put the budget estimate for Vermelho nickel mine in Brazil at $1.91 billion, up from $1.42 billion estimated a year ago, but Castello Branco said the project was still being structured for the board's approval and the numbers were preliminary.

He said Goro and Onca Puma's coming on stream would help the development of Vermelho, which should start producing only in 2012, as Vale will acquire more expertise in nickel. Vale became a major nickel miner through the acquisition in 2006 of Canada's Inco.