Stainless steel producer Dingxin Group of China and nickel mining company PT. Bintangdelapan Mineral of Indonesia have agreed to form a joint venture company in Central Sulawesi to mine and process nickel.
The company, PT Sulawesi Mining Investment (SMI), will begin producing ferro nickel after next year, Bintangdelapan president director Halim Mina said Wednesday.
SMI will be 55 percent owned by Dingxin and 45 percent by Bintangdelapan.
"We won't be just a sleeping partner like many Indonesian firms in the mining sector," Halim said.
"We have received financing from them and we'll do the management of the nickel mining.
"I think this is the first time a local company is playing a bigger role in such a mining joint venture," he said.
SMI has a nickel mining con-cession covering 47,000 hectares of land in Morowali regency, Central Sulawesi province, and will produce 2.4 million tons of nickel ore next year.
"We've been producing nickel ore, but not yet to the targeted capacity *of 2.4 million tons per year*. Hopefully we can produce nickel ore to that capacity next year. And after one year of operation we'll also start processing the ore into ferro nickel," Halim said.
"We need to make some preparations to reach the target. Part of the preparations will be developing our infrastructure; our own power plant with a capacity of at least 100 MW. We don't know yet whether we'll build a coal-fired power plant or hydropower plant or something else," he said.
The joint venture firm will invest US$20 million in its initial stages to develop the nickel business, Halim added.
"We'll increase the investments in stages because we also need to establish a stainless steel plant within five years of operation, as required by the new government regulation on mining."
According to Bloomberg, the investment could eventually reach $1 billion, including for building a nickel processing plant with a capacity of 30,000 tons a month.
The Dingxin Group had extensive experience in stainless steel production in China, Halim said.
"So we'll make the stainless steel here, but export it to China," he said.
Nickel futures have gained 58 percent this year in London, recovering from a 56 percent drop, as the end of the global recession spurs demand for metals.
The Investment Coordinating Board (BKPM) said Wednesday that Indonesia's mining sector could expect investment of up to $6 billion in the 2010-2012 period.