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Indonesia attracts US$1.4b in investment for 11 nickel smelters

[JAKARTA] Eleven new nickel smelters are to be built in Indonesia over the next two years at a cost of US$1.4 billion, a mining ministry official said, a sign that laws requiring domestic processing of ores are having an impact after initial resistance from the industry.

Early last year, Jakarta put in place export restrictions aimed at forcing mining firms to develop smelting and processing facilities so that Indonesia could refine all of its raw ores and concentrates.

Most of the six new nickel smelters due to be finished in 2015 are located in Sulawesi, Coal and Minerals Director General Sukhyar told reporters late on Tuesday. They involve a combined investment of US$920 million and will have capacity to produce 6,000 tonnes of refined nickel a year plus 66,000 tonnes of ferro nickel and 50,000 tonnes of nickel pig iron.

Another five nickel smelters set for completion in 2016 are all in Sulawesi, Indonesia's main nickel ore region, and will cost about US$468 million in total, Mr Sukhyar added.

"We estimate that if all these nickel smelters are completed, in 2018 we will be able to process 30 million tonnes of nickel ore - 50 per cent of our nickel ore exports in 2013," he said, referring to exports before the January 2014 ban.

"The mining law is not only aimed at processing ore, but its big vision is to develop our industry downstream."

Mining industry executives had balked at the idea of developing downstream industries and building smelters, citing a lack of power and infrastructure in the remote areas where mines are often located.

But despite a slump in global commodity prices and slow demand for metals from top buyer China, the government now seems to be having some success.

After a fractious eight-month export tax dispute last year, US-based miner Freeport-McMoRan Inc is now pushing ahead with expansion plans at Indonesia's sole copper smelter at Gresik and has agreed to support a new industrial project in Papua, where it owns one of the world's biggest copper mines.

Last month, in an apparent softening of the government's stance, a senior mining ministry official indicated that a total ban on exports of copper concentrates due to come into effect in January 2017 could be pushed back if miners had not built smelters in time but had made some progress.