BHP Billiton Ltd., the world’s biggest mining company, said the Ravensthorpe nickel project will cost 64 percent more and take as much as a year longer to develop, delaying supplies at a time of near-record prices.

Lower-than-expected labor productivity and late delivery of materials and equipment to the West Australian project will increase costs to $2.2 billion and delay the start to the first quarter of 2008, the Melbourne-based company said in a statement to the Australian Stock Exchange.

Nickel prices soared to the highest since at least 1987 this year as mining companies failed to meet demand driven by China. The delay and cost blowout at the third-largest nickel mine being constructed follows a similar holdup at Cia. Vale do Rio Doce’s Goro nickel project in New Caledonia. Goro is the largest nickel mine being built.

“This could be a real negative,” said Peter Chilton, who helps manage $800 million at Constellation Capital Management, in Sydney. “This could bolster nickel prices and other existing producers. It’s going to be a surprise that it got this big.”

Prices of nickel for delivery in three months on the London Metal Exchange dropped $200, or 0.6 percent, to $32,500 a metric ton as of 8:07 local time.

BHP said construction at Ravensthorpe, which is forecast to produce 50,000 metric tons a year of contained nickel and 1,400 tons of cobalt, is now 73 percent complete.

Cost Escalation

“At the time the original cost estimate for Ravensthorpe was prepared, the current tightness and cost escalation for labor and materials, which are especially severe in Western Australia, were not apparent,” Jimmy Wilson, president of BHP’s stainless steel business, said in the statement.

BHP in September last year first revised the costs of the project to $1.34 billion, a 28 percent increase. In July this year, it said the project may cost at least 30 percent more, and will be delayed from an initial start date of the second quarter of 2007.

Shares of the company gained 11 pence, or 1.2 percent, to 966 pence as of 8:08 a.m. in London. The stock has risen 1.8 percent this year.

To contact the reporter on this story: Tan Hwee Ann in Melbourne at hatan@bloomberg.net