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rench mining and metals group Eramet SA, which runs the world’s biggest ferronickel plant, is scheduled to start its US$5.5 billion nickel smelting project in Maluku in the middle of this year.

Executives of Weda Bay Nickel, a subsidiary of the group that will execute the project, revealed the plan after meeting with Industry Minister MS Hidayat and industry officials in Jakarta on Friday, discussing, among other things, a proposed tax holiday and regulations regarding the investment.

The Industry Ministry’s director general for manufacturing-based industry, Panggah Susanto, said the planned smelter on Halmahera Island, North Maluku, was scheduled to begin commercial operations in the middle of 2018.

“The initial investment will amount to $3.3 billion, and later it will likely expand to complete the project to reach $5.5 billion,” Panggah announced after the meeting. About 20 percent of the total investment will be used to finance mining operations.

In the first phase, the smelter is expected to annually produce 35,000 tons of ferronickel and 1,300 tons of cobalt in 2018, while in the second phase it will boost output to 65,000 tons of ferronickel and 3,000 tons of cobalt, according to Panggah.

Ferronickel and cobalt are basic materials used in producing carbon steel and stainless steel in the downstream side of the steel industry. The firm’s output will be sold both on the domestic market to supply the needs of local industry and overseas markets, Panggah further said.

The government is 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 requirement in the new Mining Law, which will no longer allow exports of unprocessed mineral products beginning 2014.

The government issued a regulation last year to restrict exports of unprocessed minerals to prevent over-exploitation of the country’s mineral resources prior to full implementation of the ban.

Weda Bay Nickel has committed to teaming up with local partners for the construction of the smelter, either state-owned enterprises or private firms, while sourcing up to 50 percent of construction materials locally, Panggah said.

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

The firm previously said that the project would also include a hydro-metallurgical power plant and an airport.

The Weda Bay project is 90 percent owned by Singapore-based Strand Minerals, and the remainder by Indonesia’s state-owned mining firm Aneka Tambang, which has the option to raise its stake in the project by up to 50 percent. Strand is 66 percent controlled by Eramet SA, while the remainder belongs to Mitsubishi Corporation and Pamco.