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* Axiom says wins Solomon Islands nickel mine court battle
* Court win clears way for mine development within 2 years
* Sth Pacific littered with problem mine projects
By James Regan
SYDNEY, Sept 24 (Reuters) - Tiny Australian prospector Axiom Mining has won a three-year court battle against Japanese giant Sumitomo Metal Mining to exploit a major nickel discovery in the South Pacific's Solomon Islands left idle for more than half a century.
Axiom says the ruling in the Solomon Islands High Court could lead to the nickel deposit, spanning the islands of San Jorge and Santa Isabel, finally being developed within two years, just as nickel prices soar due to an ore export ban by major supplier Indonesia in January.
"We can now re-commence our exploration of the tenement with our partners," said Axiom's Australian managing director Ryan Mount, who moved to the Solomon Islands to be close to the project.
Geologists have been aware of the Isabel deposit since 1957 but little development work has been done because of ownership changes and legal wrangling.
Analysts estimate the discovery compares in size or grade to other large South Pacific nickel mines, such as Vale SA's Goro mine in New Caledonia and the China-owned Ramu mine in Papua New Guinea.
Axiom, along with the local Kolosori and Bungusule landowner groups, was granted a prospecting licence to explore the Isabel site in 2011, but were blocked by an injunction brought through a civil claim by Sumitomo.
"We have had to endure doubt and uncertainty as Sumitomo tried to cause internal disharmony amongst us," Elliot Cortez chair of the Kolosori Trustees said. "But now that is in the past and we are looking forward to a bright future."
But developing the resource-rich veins of scattered South Pacific island nations is often not smooth sailing and has in the past led to civil unrest, a secession movement and environmental crisis. Mines have been left abandoned, leaving the jungle to devour them.
The Solomon Islands, whose main exports are palm oil, copra, timber and fish, has a GDP of about $3,450 per capita, putting it on par with Ghana and Pakistan. It has little history of mining beyond start-and-stop exploitation of the Gold Ridge gold deposit on Guadalcanal Island.
Gold Ridge was worked briefly in 1999-2000 but closed when civil unrest broke out between warring islands, restarting in 2011 only to be suspended again in April by its Australian owner owner St Barbara Ltd
The Republic of Nauru is the South Pacific's poster child for a mining frenzy gone wrong. After decades of phosphate mining Nauru had the world's highest GDP per capita, only to go broke once its reserves were mined out, leaving a legacy of squalor and a mostly unemployable workforce.
In New Caledonia local opposition to nickel mining is mounting following a half-dozen environmental incidents at the Goro nickel plant, the latest discharging 100,000 litres of acid-tainted effluent in May.
While the Panguna mine on Papua New Guinea's Bougainville island, one of the world's largest sources of copper and gold, has laid idle for a quarter of a century following a secessionist rebellion. Mining giant Rio Tinto has all but abandoned restarting Panguna.
"The difference with Axiom is that they have shown a real commitment to the country, aligning themselves with local landowners and displaying their long-term interest in their welfare," Tony Parry, a mining analyst with Resource Capital Research in Sydney said.
"I think this went a long way with the court."
Axiom, with a market value of just A$55 million (48.82 million U.S. dollars), will aim initially to ship unprocessed ore within two years to Chinese buyers to make nickel pig iron.
Sumitomo, on the other hand, had indicated it was interested in a larger, long-term development to produce refined metal.
"There is certainly a market for the nickel ore in China right now and this puts Axiom in a good position to generate cash flow at an early stage," said Parry.
A Sumitomo spokesman said the court ruling was being studied and the company was not in a position to make a comment. (Additional reporting by Yuka Obayashi in TOKYO; Editing by Michael Perry)