Mining sector attractive for investment, Susilo says

Leony Aurora, The Jakarta Post, Pomalaa, Southeast Sulawesi

Investors should not feel discouraged from entering the mining sector amid the current high global oil prices, which is pushing up production costs, President Susilo Bambang Yudhoyono says.

The high oil prices will in time bring a new equilibrium to the global economy, the President said after officiating two ferronickel projects of state mining firm PT Antam and the local unit of the world's second largest miner Inco Ltd. worth a total US$600 million in Southeast Sulawesi and South Sulawesi.

"There is increasing demand for nickel as there are more industries using this metal," said Susilo in Antam's mining complex in Pomalaa, Southeast Sulawesi, on Monday.

"We invite investors, both local and foreign, to come into the sector, even though the global economy will slow down due to the soaring oil prices," he added.

The President officiated a 102-megawatt (MW) power plant, which is constructed to supply electricity for Antam's FeNi I, FeNi II, and FeNi III smelters.

The combined-cycle plant will use marine fuel oil before gas can be provided by PT Medco Energi Internasional's Senoro field in Central Sulawesi.

With a secure electricity supply, Antam will be ready to operate its FeNi III smelter, which will start processing ore in early 2006. The new smelter will more than double Antam's total capacity from 11,000 tons per year to 26,000 tons annually, the company said in a statement.

Antam spent a total of $320 million for the power plant and the smelter.

Aside from the new power plant, the President also launched Inco's project to boost production of nickel in matte from 160 million pounds annually to 200 million pounds per year.

The project, worth $280 million, will include the construction of a 90-MW hydropower plant in Karebbe in Sorowako, South Sulawesi.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said the government and Inco had agreed on additional benefits for the higher supply. Inco would give higher royalties for the additional production, he said, without mentioning details.

Inco will also spend more on community development projects and build a 80-kilometer road connecting Bahodopi, where it holds concession rights, in Central Sulawesi to Sorowako.

The price of metals has continued to rise this year, following a strong surge in 2004. As of the first semester however, the company's sales fell 2 percent as a smelter breakdown cut nickel output.

Sales fell to Rp 714.62 billion (US$72.8 million) in the three months ending on June 30. Sales of ferronickel and nickel ore contributed 72 percent of revenue. Antam booked Rp 195.6 billion ($20 million) in net profit in the first quarter of 2005, a 33.15 percent increase from Rp 146.9 billion recorded in the same period last year.

The government owns a 65 percent stake in Antam while the public controls the rest.

Inco has reported a 13 percent rise in unaudited net profit in the year's first semester to $141.9 million from $126 million booked in the previous year on strong global prices.