Russian miner Norilsk Nickel said on Wednesday it had postponed a project to refine nickel in Botswana as costs had escalated beyond an earlier estimate of $498 million. Norilsk said the increased costs at its 85 percent-owned Tati Nickel subsidiary, acquired through its purchase last year of LionOre Mining International, were a result of higher construction, equipment and project management costs worldwide.

The company said in a statement short-term energy constraints in southern Africa also posed a risk that would have adversely affected the commissioning, start-up and overall economics of the Activox refinery project. Norilsk, the world's largest nickel miner, accounts for about one-fifth of global production of the metal used as an additive to stainless steel. It plans to produce between 300,000 and 305,000 tonnes of nickel in 2008.

Tati Nickel, in which the government of Botswana owns the other 15 percent, has started commissioning an ore-processing plant that will boost annual nickel-in-concentrate production to 22,000 tonnes by 2009 from 14,500 tonnes.

Norilsk said in the same statement the dense media separation plant at the mine would reduce total cash operating costs and extend the life of the mine by seven years to 2019.

It said the Tati mine had ore reserves of 99 million tonnes and mineral resources of 98 million tonnes.

Norilsk said it would continue to pursue the Activox refining process despite the postponement of the refinery plan, and would operate the technology at a demonstration plant in Botswana using feed from its Kola peninsula mines in Russia.

(Reporting by Robin Paxton; editing by Christopher Johnson)

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