BHP Billiton Ltd , the world's top miner, said on Friday it will be at least two years before its Ravensthorpe nickel mine in Western Australia reaches full capacity of 50,000 tonnes a year after a series of delays and $1 billion in cost overruns.

The project, which started production in 2007 about nine months behind schedule, has cost about $2.2 billion to build and is one of the largest nickel-making facilities in the world.

It hasn't been a walk in the park, BHP's president of stainless steel materials, Jimmy Wilson, told a media brieifng.

Ravensthorpe has faced spiralling materials and labour costs over its four-year development phase, which saw its initial cost estimate of $1 billion more than double by the time the project was erected in remote Australian farmland near the Great Australian Bight.

Wilson said the project was currently operating at about 35 percent of full capacity and output would rise steadily over the next year and a half, reaching full capacity in the second half of the financial year ending June 30, 2010.

We don't see any constraints that are insurmountable, he said.

The project employs complex technology involving the leaching of dry ores known as laterites. Earlier attempts at the process in Western Australia have struggled for viability.

Laterite ore contains only small amounts of nickel and requires intensive processing to produce a saleable mix of nickel and also cobalt.

Andrew Forrest, recently crowned Australia's richest man after making a fortune in iron ore mining, was ousted from the board of Anaconda Nickel Ltd after problems with his multi-billion-dollar Murrin Murrin project in the 1990s.

Anaconda, founded by Forrest was later restructured and renamed Minara Resources Ltd . It has yet to reach its promised production runs of 40,000 tonnes a year-plus.

BHP initially estimated in 2004 it would cost $1.05 billion to build the Ravensthorpe complex and upgrade a nickel refinery in Townsville, Queensland on the other side of Australia for value adding.

Two years later, in October 2006, the president of BHP's steel materials division, Chris Pointon, left following cost over runs of more than $1 billion and start-up delays.

Still, BHP says the metal, needed to add strength and sheen to stainless steel, is in abundance in the clay-like ore around Ravensthorpe.

Nickel, which in the past has sold for up to $50,000 a tonne, currently fetches around $25,000 on the London Metal Exchange .

Future swing production of nickel pig iron predominantly by China, would eventually smooth out volatility in world nickel prices by better balancing supply and demand, Wilson said.

(Reporting by James Regan; Editing by James Thornhill)

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