Inco to receive loans from parent company

JAKARTA (JP): PT International Nickel Indonesia said on Wednesday that its parent company Inco Limited of Canada would provide subordinate loans totaling US$200 million to support its activities.

Inco Indonesia president Rumengan Musu said after a general shareholders meeting here that $104 million would be used in financing the company's ongoing expansion project in Soroako, South Sulawesi, and the remainder earmarked to strengthen its working capital.

He said ongoing projects included the $580 million hydropower plant, scheduled for completion by the end of this year.

The plant is to support newly completed processing facilities, which will enable the company to increase its production capacity by 50 percent, he said.

"By the end of 1999, Inco Indonesia will boost its capacity from the current 45,000 metric tons to 67,500 metric tons."

He said Inco Indonesia obtained approval from its shareholders on its decision not to distribute dividends for 1998 due to the expansion projects and depressed nickel prices.

The spot price of nickel on the London Metal Exchange fell 54 percent at the end of last year from the level in March 1997, he added.

Musu attributed the decline to falling demand from Asian economies and concern about the short-term nickel supply-demand outlook.

Despite the difficult market situation, Musu said, Inco Indonesia still gained a profit last year.

It booked net profit of $6.2 million in 1998, a 74.5 percent drop from $24.3 million the previous year.

Inco Indonesia has mining concessions in the three provinces of south, southeast and central Sulawesi.

Its contract with the Indonesian government grants it a 30- year land concession from April 1, 1978, to March 31, 2008.

In December 1995, Musu said, the government extended the contract maturity for another 17 years to Dec. 28, 2025. Under the revised contract, Inco is required to pay a government royalty of $78 per metric ton of nickel it produces.

Musu said the contract contained a royalty formula which took into account nickel price fluctuations in deciding the amount of fees due. He declined to reveal the method. (02)