BHP Billiton has hired Bank of America-Merrill Lynch to advise it on a sale of its Ravensthorpe nickel operation in an auction which could fetch $1 billion, a source with direct knowledge of the matter said on Friday.

BHP, the world's largest miner, shut the operation in less than a year after spending more than $2 billion on its construction, citing depressed world nickel prices.

A BHP spokesman did not confirm that Ravensthorpe was for sale but said multiple parties have expressed interest in buying the operations since it was mothballed.

Chinese, South American and European miners have shown strong interest, the source said, in a sale that could take up to six months to finalize.

The source was not authorized to speak publicly about the matter and declined to be identified. Bank of America-Merrill Lynch declined to comment.

The source added that a recovery in nickel prices is drawing interest in the sale. Nickel prices are up about 78 percent this year.

Australia's Poseidon Nickel has also been named in media reports as a potential suitor.

In July, BHP announced the sale of its Yabulu nickel refinery in northeast Queensland state, which had processed nickel ore from Ravensthorpe, taking a writedown of $675 million.

BHP was asking for roughly $790 million for Ravensthorpe, the Australian Financial Review said last month, citing a well-placed source.

BHP CEO Marius Kloppers was asked earlier this week about the sale of Ravensthorpe in a media teleconference following the miner's report of a 30 percent slide in annual profit excluding writedowns, its first fall in seven years.

I cannot go beyond the statements we have made before, which are that we are considering the options, Kloppers said.

(Additional reporting by James Regan; Editing by Muralikumar Anantharaman)

Australia Merrill Lynch Sale