Rio Tinto Expecting Breakthrough On Nickel Venture

Global miner Rio Tinto is edging closer to building a multi-billion dollar nickel venture in Indonesia, and fiscal terms on the Sulawesi project may be settled in the next few months, a company senior executive said.

Eric Finlayson, head of Rio Tinto exploration, said that his business unit expects to hand over Sulawesi to the company’s project development team in the second half of this calendar year.

The handover may happen in the next few months as Rio is “very close” to finalizing terms with the government, he told reporters on the sidelines of the AMEC mining congress in Perth.

“We’re talking about something that, at the outset, would throw out about 45,000 (metric) tons of nickel a year,” Finlayson said.

However, first production may be six years away, depending on how fast Rio can
push the evaluation and development program, he said.

Rio had hoped to settle government terms on Sulawesi last year.

However, according to reports out of Jakarta last month, an agreement was held
up by last-minute wrangling over the tax formula for the potential $2 billion venture.

London-based Rio, which lacks a nickel unit, currently earns most of its revenue from iron ore and copper which, like nickel, are booming because of strong Chinese economic growth.

It declined to bid in 2005 for Australia’s WMC Resources, which eventually went to competitor BHP Billiton at a cost of A$9.2 billion.

Since then, Rio has remained on the sidelines during the wide-ranging nickel industry merger activity that has seen Brazil’s CVRD take over Canada’s Inco and Russia’s Norilsk trump an offer by U.K-listed Xstrata for Canada’s LionOre Mining.

Last month there was speculation that Rio might be a takeover target for
Melbourne-based BHP, though analysts rate a near-term move as unlikely unless Rio is put into play by a third-party predator, such as a cashed-up private equity group.