Russia's Solway confirms $3 bln nickel smelter investment in Indonesia

Russia's Solway Group on Thursday confirmed plans to build an Indonesian nickel smelter with the capacity to produce 50,000 tonnes of the metal a year. 

"We expect to start production in 2014," said Vasily Tsarev, consulting partner for Solway in Indonesia, adding that capacity could be expanded to 80,000 tonnes. 

Hatta Rajasa, Indonesia's chief economic minister said on Monday that the Russian firm planned to invest $3 billion to build the smelter on Halmahera island in eastern Indonesia, a sign of growing interest by investors in the country's mineral processing industry. 

The firm will feed the plant with nickel ore from its concession on the same island, which has confirmed resources of 50 million metric tonnes ore, said Tsarev 

"But resources can range between 110-115 million tonnes when we do further exploration," he said, adding the firm is looking to acquire nickel mines on Sulawesi island. 

Indonesia currently produces ferro-nickel from three smelters operated by Aneka Tambang, and nickel-in-matte from smelters operated by PT Inco Tbk , a unit of Brazil's Vale . 

French's Eramet , the world's sixth-largest nickel producer, has a nickel project on Halmahera in a joint venture with Indonesian state miner PT Aneka Tambang Tbk .

Aside from the nickel smelter, privately owned Solway plans to build a 400 MW coal-fired power plant which will be used to power the smelter, said Tsarev. 

The firm will burn low-quality coal with heating value 5,000-5,500 kcal/kg for the power plan which will be supplied by its coal concession in West Papua, he said. 

Indonesia, the world's top exporter of tin and thermal coal, is keen to increase revenue from the mining sector. Under a new mining and coal law, miners must by 2014 carry out a minimum of processing before exporting, including on nickel. 

Indonesia's mining sector attracted 53 trillion rupiah or $6 billion in bank financing up to September 2010, versus the 14 trillion rupiah that banks loaned to the industry in 2006, central bank figures show, despite uncertainties over the country's new mining law. 

Foreign direct investment as a whole is growing into Southeast Asia's biggest economy, as investors eye its mineral wealth, booming domestic consumption and increased stability, despite concerns over rampant corruption, red tape and inadequate infrastructure. Source: Reuters