* Plan is to mine ore in New Caledonia and refine it in Vanuatu
* Vanuatu asks partners to seek approval to build a refinery
* South Pacific seeking to lift role in world nickel supply
By James Regan and Cecile Lefort
SYDNEY, Sept 30 (Reuters) - The South Pacific islands of New Caledonia and Vanuatu are studying a plan to jointly mine and process nickel ores into refined metal to help produce stainless steel in China.
The acting prime minister of Vanuatu, Ham Lini, has expressed interest in the proposal and has asked the partners to lodge a formal application to construct the smelter in his country.
The move comes as Chinese steel mills scour the Asia-Pacific region for alternative supplies of nickel after top supplier Indonesia imposed a ban on such exports in January.
Under the proposed partnership, New Caledonian company MKM Group and China's Jin Pei Century Investment (Group) Co Ltd plan to mine low-purity nickel ore in the French Pacific territory and ship it to Santo in northern Vanuatu for smelting.
Media reports in New Caledonia said the project would be owned 51 percent by MKM and 49 percent by Jin Pei.
The head of MKM, Wilfried Mai, told New Caledonian television he had advised the Chinese investors to build the plant in Vanuatu.
"It's a country in Melanesia, there is no tax, labour is not expensive and it's not far away from our country - all the advantages," Mai said.
Vanuatu has no history of mining or refining.
In contrast, New Caledonia is awash with nickel ore, holding as much as a quarter of the world's known reserves. Nickel dominates the economy, with than 6,000 people employed in processing of the ore.
But building a new plant there would prove difficult, given mounting local opposition to such industries following half a dozen environmental incidents at Goro nickel plant, owned by Vale of Brazil, the latest involving the discharge of 100,000 litres of acid-tainted effluent in May..
Another smelter in the capital, Noumea, operated by Societe Le Nickel and part owned by France's Eramet, has long been criticised for filling the sky with smoke and marring the natural beauty of the area.
Vanuatu's government is sensitive to such concerns.
"The government wishes to stress the importance of ensuring that landowners receive maximum benefits from the refinery if it is established, and that the plant does not adversely impact their environment or compromise the lives of their future generations," Lini said in a statement emailed to Reuters.
The Indonesian ban removed a third of global nickel mine supply, driving nickel prices up by as much as 50 percent this year.
South Pacific countries are vying to play a bigger role in supplying nickel, which is required to make stainless steel.
This month, a court in the Solomon Islands finally unlocked a large nickel deposit that geologists have known about for half a century but have been unable to exploit because of ownership changes and legal wrangling.
A nickel mine in Papua New Guinea developed by Ramu NiCo and majority-owned by Metallurgical Corp of China is already operating. (Editing by Alan Raybould)