BHP plans nickel project in Indonesia

Jamie Freed, smh.com.au

BHP BILLITON has quietly advanced plans to start building a $US2 billion-plus ($2.2 billion-plus) nickel laterite project in Indonesia within three years, even though the project falls outside its main development pipeline presented to investors this month.

BHP has posted job advertisements for the Pearl project in an unspecified part of eastern Indonesia on its website. It is searching for a mining manager, community relations head and other senior managers.

The company said it expected the "world-class" development, comprising mines, a large processing plant and associated infrastructure, to start construction within three years. Given laterite projects take three to four years to build, BHP is apparently planning to start production in 2014 or 2015.

A presentation by BHP's chief executive, Marius Kloppers, this month did not list the project on the main development pipeline. But a slide on the company's nickel division contained a bubble representing a $US2 billion-plus investment for an "eastern Indonesian facility" - presumably the Pearl project - as having "future project potential".

BHP owns a nickel laterite project in eastern Indonesia - the Gag Island project off Papua. The controversial development has been placed on indefinite hold given the deposit resides in a protected forest.

A BHP spokeswoman, Emma Meade, was unable to provide any details on the Pearl project beyond those in the job advertisements, but she said it was a separate project from Gag Island.

BHP is nearly finished constructing its $US2.2 billion Ravensthorpe nickel laterite project in Western Australia, which is expected to produce 50,000 tonnes of nickel a year after it reaches its full production rate. Like many other nickel projects around the world - including Vale's Goro project and Xstrata's Koniambo project, both in New Caledonia - Ravensthorpe experienced a series of delays and cost blow-outs.

The BHP takeover target Rio Tinto, which does not produce nickel, this month approved development of the $US300 million Eagle nickel sulfide mine in the United States. Nickel sulfide deposits are more simple to develop than laterite deposits, which require high-tech processing, but a shortage of sulfide deposits has led miners to construct large laterite plants in recent years.

Rio also plans to develop the $US2 billion Sulawesi nickel laterite project in Indonesia. Although contract discussions with the Indonesian Government have led to several delays, this month Rio said it was in "final" negotiations. Rio said Sulawesi would produce up to 46,000 tonnes of nickel a year after starting production in 2015.