Govt studies Inco request to boost output

Leony Aurora, The Jakarta Post, Jakarta

The government is considering nickel mining company PT International Nickel Indonesia's request to expand production of its giant mine in Soroako, South Sulawesi, to 200 million pounds of nickel in matte by 2009.

The government's concerns included that the development in the company's two other blocks, namely Bahodopi in Central Sulawesi and Pomalaa in Southeast Sulawesi, would stall as it focused on Soroako, said Mahyudin Lubis, director of coal and mineral endeavors at the ministry of energy and mineral resources.

"We'd like to approve the expansion, but there have to be benefits for the areas that are yet to be developed," he said on Thursday.

The Indonesian unit of the world's second largest mining company Inco Ltd. is seeking to lift production in Soroako from the current 160 million pounds of nickel in matte to 200 million pounds by 2009.

To support the expansion, the firm wants to build a 350- megawatt hydro power plant in Karebbe, with an estimated investment of US$280 million.

While Pomalaa has produced ores, and thus brought royalties for the local administration, Bahodopi, located within Morowali regency, is yet to deliver revenue for its regional administration.

Lubis said the local administration had requested that the central government find new investors to speed up the development in Bahodopi. "We couldn't do that as we are bound by the contract," he said.

Based on its contract, Inco is obliged to submit feasibility study results by 2009.

Inco's director of government relations Sri Kuncoro said the company had been conducting advanced exploration in Bahodopi since last year.

"Next year we will conduct bulk sampling," he said. "If the results turn out to be good, we will proceed with the feasibility studies."

Lubis said one of the options to give benefits to the people of the area was to establish more community development projects.

He added that the government was also concerned that the rapid development of Soroako would cause an oversupply of nickel and subsequently lower prices.

Nickel prices surged last year as demand from producers of stainless steel and other alloys in China grew. In 2004, nickel was priced at $4.88 a pound, up 51 percent from an average of $3.23 per pound in 2003, based on benchmark prices at the London Metal Exchange.

Inco's net profits rose to $265.1 million in 2004, from $104.2 million the year before, supported by a 56 percent jump in sales revenues from $509 million in 2003 to $792.1 million last year.