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Rio Tinto to review stake in closed Papua New Guinea copper mine

* Rio Tinto (Xetra: 855018 - news) in early stages of talks with Bougainville government

* Sale of Bougainville Copper (Other OTC: BOCOF - news) stake an option

* Any reopening of mine would be years away -BCL Chairman (Adds comment from Bougainville Copper chairman)

MELBOURNE, Aug 18 (Reuters) - Rio Tinto is set to decide on its stake in a long-dormant copper mine in Papua New Guinea's Bougainville after the passage of a new mining law on the island, with the company possibly pulling out of the project after a quarter of a century.

The interim mining law converts Bougainville Copper Ltd's mining lease into an exploration lease. That can be converted to a mining lease if approved by the autonomous province's government, which now controls resources on the island.

"In light of recent developments in Papua New Guinea, including the new mining legislation passed earlier this month by the Autonomous Bougainville Government (ABG), Rio Tinto has decided now is an appropriate time to review all options for its 53.83 per cent stake in Bougainville Copper Limited (BCL)," the company said on Monday.

Rio Tinto declined to comment on what was the most likely outcome of its review or how soon a decision would be made. Selling its stake would be an option.

A secessionist rebellion on Bougainville in 1989 stopped mining at BCL's Panguna mine. The mine produced some 3 million tonnes of copper and 9.3 million ounces of gold over 17 years.

The company has been in talks with the government of Papua New Guinea, the Autonomous Bougainville Government and landowners about whether to return. BCL's chairman said those talks were at a very early stage.

Chairman Peter Taylor said it was unclear what Rio Tinto was going to do with its stake, but added that he did not expect BCL to buy it.

He did not know whether any company has approached Rio to buy its stake in BCL, but said no firm had contacted BCL about a takeover or investing in development of the mine.

"BCL is committed to reopening the mine," Taylor told Reuters by phone from Sydney, adding that BCL would need to complete a bankable feasibility study before deciding whether to go ahead with the project.

It would then would need to gain a mining lease, order equipment, rebuild some roads and an export port.

"At the most optimistic, it's going to take a lot of years to get this mine open even if everything goes right," he said.

Bougainville Copper shares rose 2.5 percent to A$0.41 in a flat broader market.

(Reporting by Sonali Paul; Editing by Michael Perry and Joseph Radford)

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