Wednesday, September 06, 2006

Rio Tinto's Lasamphala nickel project facing delay

Rio Tinto's US$1 billion nickel project in Lasamphala, Central Sulawesi is facing another delay as government agencies failed to settle the concession area and tax issue.

Simon Felix Sembiring, director general of Mineral, Coal & Geothermal at Energy Ministry confirmed the possible delay of working contract scheduled for signing this month.
"Rio Tinto is asking for guarantee that the concession area would not be converted into conservation forest. They want the guarantee is inserted in the contract but forestry ministry rejected that," he is quoted by on Wednesday.
The government will charge a royalty of 3% of sales. Rio Tinto is planning to invest $1 billion in the nickel mine. With the new investment, the world's third largest mining company is expected to produce 46,000 metric tons of nickel and employ about 5,000 workers.
The Lasamphala mine is located on the border between Central and Southeast Sulawesi provinces.
Rio Tinto applied for the contract in 1999, but the application process slowed down when Indonesia's central government started to transfer various decision-making powers to regional authorities.
French-based company Eramet had also announced its plan to invest US$1.5 billion in developing nickel project in Moluccas Island.
The world demand for nickel is growing, driven by the market for stainless steel, which accounts for 54% of nickel consumption in the USA and more than 60% in other countries.
Nickel prices have increased tremendously in the last few years and that has led to many new exploration projects around the world. Nickel price increased from around US$7,000/ton in early 2004 to US$12,000/ton recently. Prices peaked at a 14-year high of $17,700 a ton in January 2006.
PT Inco Tbk is the largest nickel producer in the country.

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