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More support needed for banks, miners to boost nickel exploration
Indonesia should foster a friendly environment for mining firms so that nickel reserves can be tapped and the country can move away from importing the commodity, according to industry observers.
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Hot topic: A furnace operates on Sept. 9, 2022, at a nickel smelting facility that belongs to PT VDNI on the Morosi industrial estate in Konawe, Southeast Sulawesi. The company processes nickel and produces stainless steel. ( Antara/Jojon)
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ndonesia needs to introduce further incentives for nickel miners and the financial sector to encourage the exploration of the country’s nickel reserves and lower imports of the commodity.
Despite its status as the world’s largest nickel producer, Indonesia imported 53,863 tonnes of nickel ore in the first half of 2023, up from 22,503 tonnes in 2022, Statistics Indonesia (BPS) data shows.
Experts point to a jump in the nickel processing capacity to explain the rapid increase in ore imports, noting the importance of keeping domestic supply and demand balanced.
Ahmad Zuhdi Dwi Kusuma, an analyst at state-owned Bank Mandiri, said the government needed to incentivize nickel exploration as well as financing, as banks were rarely interested in funding such projects.
“Because, for example, banks can take collateral for other assets from companies that want to carry out exploration projects, but this requires that the government provide incentives for both the bank and the company,” he told The Jakarta Post on Wednesday.
Mining projects have often been financed through equity and debt financing, according to United States-based law firm Squire Patton Boggs, with notable traditional structures including joint venture arrangements and capital market issuances.
But recent years have highlighted the hurdles and limitations of financing mining projects through traditional structures, especially when commodity prices are low or there is political uncertainty in the host country, according to a report the firm published in 2022.
