Inco earmarks $120m in capital expenditure to boost production

Leony Aurora, The Jakarta Post, Jakarta

Publicly listed PT International Nickel Indonesia (Inco), a local subsidiary of the world's second-largest nickel producer Inco Ltd., plans to invest US$120 million in capital this year as it continues the construction of a new hydropower plant.

Some $50 million of the capital expenditure would go to the dam project in Karebbe, Southeast Sulawesi, director Raymond Westall said on Wednesday.

"The rest is for the maintenance and environmental-related projects," he said.

Inco began the 90-megawatt hydropower plant to boost the company's output capacity to 200 million pounds of nickel matte by 2009.

Last year, Inco produced 159 million pounds of nickel from a number of nickel mines, notably in its giant mine in Sorowako, also in Southeast Sulawesi.

It targets a slight rise in output this year to 160 million pounds.

President Bing Tobing said the hydropower plant, which would be the company's third, would cost a total of $250 million over four years.

He also announced that the shareholders meeting had approved a final dividend of 9.75 U.S. cents a share for 2004, which would be paid on May 10. The company paid an interim dividend of 1.25 cents a share on Nov. 25 last year.

Higher nickel prices and record-setting production boosted sales last year and more than doubled Inco's net profit to $265.1 million from $104.2 million the year before.

Sales revenues jumped 56 percent from $509 million in 2003 to $792.1 million the following year.

Bing was convinced that nickel prices would remain strong this year as demand from producers of stainless steel and other alloys in China continued to grow.

"The (global) nickel supply is still below demand," he said.

Nickel in 2004 averaged at $10,766 a ton, or $4.88 a pound, up 51 percent from an average of $7,117 per ton, or $3.23 per pound, in 2003 based on the benchmark prices at the London Metal Exchange.

On Wednesday, Inco shares in the Jakarta stock exchange fell 4.3 percent, about Rp 600, to close at Rp 13,300.