P

ublicly-listed PT Vale Indonesia set high expectations for the company’s newly installed electric furnaces in Sorowako, South Sulawesi, after undergoing early repairs and consequent upgrades following an incident involving angry locals last year.

“We just turned the power on for furnace #2 in the beginning of April, and we are expecting this furnace to be fully in production in May. The furnace has 20 percent higher capacity,” finance director Bechara said after the company’s extraordinary shareholders meeting on Wednesday.

According to the company’s statement, the repair and upgrades of furnace #1 and #2 were due to an unforeseeable incident that affected both furnaces. The company said it had utilized the situation to move forward scheduled maintenance work to November, a year earlier than previously planned. Consequently, the company produced less nickel in matte in the fourth quarter of last year, compared to the same period in 2010.

The incident in question involved a group of people claiming to represent the interests of Sorowako residents. The group staged a protest by arresting the company’s workers and blocking strategic roads in the small city.

They demanded retribution for agriculture lands they claimed were flooded as a result of the construction of the company’s power plant. The protesters also demanded the company to prioritize the recruitment of locals in its hiring practices. It is not clear how the incident led to the damage of the furnaces. The company finally reached a settlement with local residents in February.

The shutdown of the furnaces for early repairs and upgrades caused Vale to report a drop in production volume last year to 66,900 tons, a 11 percent decline from 2010’s production of 75,989 tons.

The company is expecting to produce around 72,000 metric tons of nickel matte this year.

Vale president director Nicolaas “Nico” Kanter hinted that the shutdown might still influence the company’s performance in the first quarter of the year.

“We are still on track for what we have planned, although the result of the first quarter remains low. Because we concentrated all the shutdowns in the first quarter, we hope that we will recover and our production will return to predicted levels,” Nico said.

Vale, previously known as PT International Nickel Indonesia, is 58.73 percent owned by Vale Canada Limited, 20.09 percent by Sumitomo Metal Mining Co. Ltd and 21.18 percent by the public.

On Wednesday, Vale’s shareholders approved a measure to disburse US$185 million or 55 percent of its $332.99 million in net profits from 2011 as dividends.

The company paid $100 million as interim dividends in November 2011 and will pay the remaining balance on June 1.

“As we have a strong investment plan, we are holding some of our cash in order to be prepared to proceed with our investment plan. We will also use the funds as working capital,” Bechara said.

The company is allocating $150 million for capital expenditures this year to support studies for development plans.

According to Nico, Vale is expecting that it will produce up to 120,000 metric tons in nickel matte within five or six years. Vale’s current production accounts for about 5 percent of world’s nickel supply.

The company needs about $2 billion to support capacity upgrades in order to reach production goals in the coming years.

— JP/Raras Cahyafitri