By Nick Carey

BIG BAY, Michigan (Reuters) - Standing on the marshy ground at Eagle Rock in the remote woods of Michigan's Upper Peninsula, it's hard to imagine that beneath one's feet is a lump of nickel worth billions of dollars.

"This is where the money is," said Chauncey Moran, vice chairman of the Yellow Dog Watershed Preserve conservation group, whose mission is to protect the Yellow Dog River and surrounding watersheds.

Cold water comes almost to the knees of the waterproof boots covering Moran's legs. He looks down into the thick marsh grass and water at his feet. "I bet you've never stood over $8 billion worth of nickel before," he said, his white-bearded face breaking into a grin.

This isolated spot is at the heart of a battle over plans by Kennecott Eagle Minerals Company, a U.S. unit of Anglo-Australian mining giant Rio Tinto, to mine that nickel ore. Rio Tinto is the world's No. 3 mining company.

Opponents argue that the project would violate an area that is considered sacred by a local American Indian tribe and could send chemical pollution into Lake Superior, one of the Great Lakes that straddle the U.S.-Canadian border.

The company defends its plans, which it says call for $350 million in spending and creating more than 200 jobs.

Jon Cherry, who heads the project for Kennecott, said the value of the nickel fluctuates with the market but is "in the billions," adding that the mineral deposit here is "close to if not the highest concentration of nickel in the world."

Nickel is a metal used in a variety of industrial and consumer products such as stainless steel and other corrosion-resistant alloys, rechargeable batteries, magnets, coins and other applications.

Kennecott is waiting for final approval from the state, pending a Michigan Department of Environmental Quality review of the claim by local Chippewa Indians that the project would harm the Eagle Rock spiritual site.

Pollution-related objections raised about the project have been rejected by the state. Conservationists argue the mine project could pollute water that feeds Lake Superior. The Great Lakes account for 22 percent of the world's fresh water.

'GOOD CORPORATE CITIZENS'

Kennecott says its plans exceed Michigan's environmental standards and have the backing of community leaders and many local people because they would bring jobs.

"Mining is part of our heritage up here," added Steve Powers, the top official in Marquette County.