France's Eramet to Build $5.5 Billion Indonesian Nickel Smelter

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--The French mining and metals group Eramet S.A. (OTC:ERMAY) (Paris, France), which is currently developing the Weda Bay Nickel (WBN) project in Indonesia, one of the largest nickel deposits in the world, is scheduled to start a $5.5 billion nickel smelting project in the country at Maluku in mid-2013.

Last week, WBN executives met Indonesian industry ministry officials and had discussions about a proposed tax holiday and regulations regarding the investment.

The smelter on Halmahera Island, North Maluku, is scheduled to begin commercial operations in mid-2018. The initial investment will amount to $3.3 billion, and the project will be expanded in a second phase with an investment of $2.5 billion. About 20% of the total investment will be used to finance mining operations.

In the first phase, the smelter is expected to produce 35,000 tons of ferronickel and 1,300 tons of cobalt annually. In the second phase, the output will be boosted to 65,000 tons of ferronickel and 3,000 tons of cobalt. Output of both materials will go to the domestic and overseas carbon and stainless steels markets.

The government has been encouraging miners to develop their own smelting plants or cooperate with other smelters to process their mineral ores, so that they will be able to fulfill the requirements of the country's new mining law. The law stipulates that, as from 2014, no exports of unprocessed mineral products will be allowed. Last year, a regulation was issued to restrict exports of unprocessed minerals to prevent overexploitation of the country's mineral resources prior to full implementation of the ban, Jakarta Post reports.

A government official said that WBN had committed to teaming up with local partners for the construction of the smelter, either with state-owned enterprises or private firms, while sourcing up to 50% of construction materials locally.

The project will absorb about 2,200 workers in the initial phase of operation and 3,500 workers in the second stage.

For related information see November 12, 2012, article - Indonesian Supreme Court Upholds Nickel Miners' Challenge on Raw Material Export Ban.

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