* New Century plans to dismantle troubled refinery
* Company will look to produce mixed hydroxide for batteries
* Shares fall by a quarter, cut losses to 4% (Adds comment, details on deal)
MELBOURNE, May 26 (Reuters) - Australia's New Century Resources Ltd NCZ.AX said on Tuesday it was in talks with Brazilian miner Vale SA VALE3.SA to buy its nickel and cobalt operations on the Pacific island of New Caledonia.
Vale said it received non-binding offers in April after putting them up for sale in December as the operation faced technical setbacks, a chemical spill and protests. zinc miner New Century said it would conduct due-diligence exclusively to buy the unit that owns and operates the Goro nickel and cobalt mine which also has a processing plant and a port facility.
New Century Managing Director Pat Walta said it planned to decommission the troubled refinery and move to producing a mixed hydroxide product, a staple of the battery industry, as well as simplifying the plant's feed.
"This is about Vale ensuring they leave a positive legacy behind ... they are prepared to put up the financial incentive to get that process done," he told Reuters.
Financial details of the deal were not provided but Vale said it would book a $400 million impairment on any sale.
Revised operations are designed to maximise efficiency and production while lowering costs, noted brokerage RBC.
"Therein lies the potential value upside for a project that has scale but has struggled to operate at a competitive cost base since its commencement," it said in a note to clients.
New Century has not been able to manage promised zinc recoveries at the operations it bought from MMG Ltd 1208.HK in 2017. Its shares fell 26% on Tuesday before cutting losses to be down 4%.
The acquisition would make New Century a major supplier of nickel, and cobalt that has not been sourced from the Democratic Republic of Congo, the world's biggest supplier.
Australian nickel miner IGO Ltd IGO.AX , which became New Century's top shareholder in April, supported the deal, New Century added. February, Vale reported a fourth-quarter net loss largely due to a $2.51 billion impairment it took at the New Caledonia operations, where it also slashed full-year expected production.