J

akarta-listed diversified miner PT Aneka Tambang (Antam) and Australian Direct Nickel Pty Ltd (DNi) have agreed to continue their cooperation on the construction of nickel laterite processing plants.

Under the deal signed on Monday '€“ which is a follow-up to an agreement in May 2012 '€“ Antam and DNi will continue cooperation for a test-plant project in Perth, Australia.

The two companies will progress on a definitive agreement to develop the first nickel laterite processing plant in Indonesia pending the outcome of the test-plant project.

'€œThe size of the first plant is something yet to talk about. But my guess is it will be somewhere between 10,000 to 5,000 tons in production per annum. We'€™re not looking at billions of dollars of capital expenditure [...] it will still be probably US$400 million to $500 million,'€ DNi chief executive officer Russell Debney told reporters here on Monday.

Antam agreed last year to send 200 tons of laterite nickel to DNi to be used for a test plant in Perth. In a statement released last Friday, DNi announced that its test plant had produced the first marketable nickel cobalt concentrate in the form of a mixed hydroxide product (MHP).

The company is working on the second stage of the test plant, which is expected to be completed in November. Following the completion of the test-plant project, a joint venture with Antam would be established and a feasibility study would be performed next year, according to Eko Taufik Wibowo, a director with DNi'€™s unit PT Direct Nickel.

'€œConstruction is expected to start in 2015 and commercial operations in 2017,'€ Eko said.

The nickel laterite processing plant will produce nickel cobalt along with its derivatives, which are the main products for the stainless steel industry.

DNi and Antam have not decided where the processing plant will be located. '€œMonday'€™s agreement is for research cooperation. The material needed is low-grade nickel, which is located in Pulau Gag [West Papua] and in East Halmahera. However, we haven'€™t discussed the location,'€ Antam corporate secretary Tri Hartono said.

According to Tri, Antam'€™s total nickel resources and reserves amount to 825 million wet tons as of the end of 2012. Most of the reserves are low-grade nickel, he said. The planned processing plant development is part of Antam'€™s move to process raw material in the country, in anticipation of the ban on raw material exports starting on Jan. 1, 2014.

Antam finance director Djaja Tambunan has said that the company was focusing on three projects. The projects are the expansion of the Pomalaa ferronickel plant in Southeast Sulawesi, the East Halmahera FeNi project in North Maluku and Tayan Chemical Grade Alumina (CGA) in West Kalimantan.

'€œWe have been told the export credit agency of Finland and Denmark will support the East Halmahera FeNi project. The Finnish agency will likely support the power plant [at the East Halmahera project] while the Danish agency will support the smelter[s],'€ Djaja said.

Antam, which is 65 percent owned by the government, has set aside Rp 5.3 trillion (US$526 million) in capital expenditure this year for all of its development projects. Djaja said the company had spent 34 percent of the total allocation, or around Rp 1.8 trillion, in the first six months of the year.

According to Djaja, Antam will likely cut its expenditure spending this year as the company will have to maintain its cash flow amid declining nickel prices.

Mining companies have been suffering from plunging commodity prices since last year on the back of a weak global economy.