Michigan withdraws Kennecott mine OK

The Michigan Department of Environmental Quality has withdrawn its initial approval for Kennecott Eagle Minerals Co., a unit of Rio Tinto Group Plc, to build what would be the only primary nickel mine in the U.S.

The decision came after the department said it discovered that two reports on the structural integrity of the mine had not been made part of the public record or given adequate review. In a statement released on its Web site on March 1, the department said it also canceled public hearings to review the project that were scheduled to begin Tuesday.

The failure to enter the documents into the public record was the state's error and not due to any action on the part of Kennecott, department spokesman Robert McCann said Tuesday. Kennecott announced it had won initial environmental approval from the state of Michigan in January.

"We haven't denied or approved the mine as of now," McCann said. "We're simply taking a step back and we hope to get moving on this as quickly as possible."

London-based Rio Tinto, the parent company of Kennecott Utah Copper, has reported surging profit on higher metals prices. Nickel traded at a record on March 1 as supplies failed to keep up with demand from stainless steelmakers.

Kennecott said in January it hoped to begin construction on the mine in late 2007 and start mining operations in 2009. The company does not know yet if it will be able to maintain those plans, Kennecott Eagle Manager Jon Cherry said Tuesday by telephone.

"This is strictly a state department internal administrative issue," Cherry said. "We have provided all of the documents required and are waiting to see where they go with their review."

The department is now "exploring opportunities to have an outside party come in and help us with the review process," McCann said.

The $150 million Kennecott Eagle Mine is expected to produce about 250 million to 300 million pounds of nickel and 200 million pounds of copper over its life.