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Indonesia's Virtue Dragon smelter ships first nickel pig iron

Kitco News

By Wilda Asmarini

JAKARTA, Sept 28 (Reuters) - A China-backed Indonesian nickel pig iron smelter made its first shipment last month and expects production this year of about 100,000 tonnes, a company official said, despite an Indonesian policy shift on ore exports.

Virtue Dragon, a unit of China's De Long Nickel Co Ltd, completed an initial shipment in August of 10,000 tonnes of nickel pig iron, used in steel making, the company's resource supply head, Agus Suhartono, told reporters.

Virtue Dragon, which expects to spend $1 billion in the first phase of its Indonesian smelter development project, said in January it was putting a 25 trillion rupiah ($1.9 billion)expansion on hold after the government abruptly reversed a ban on the export of nickel ore and bauxite.

The policy change was a blow to Indonesia's smelting industry which took off after the country banned mineral ore exports in 2014 to spur higher-value processing.

Virtue Dragon said at the time that it and other smelter companies were considering legal action over the policy shift. Suhartono said the smelter in Indonesia's Southeast Sulawesi province is currently operating five of a planned 15 furnaces, and is targeting output of 600,000 tonnes of NPI a year in its first phase.

"We are still on track," he said.

Virtue produces NPI with between 10 percent and 12 percent nickel content.

The company is preparing to begin a second phase of development that would add 1.2 million tonnes of NPI and 3 million tonnes of series 300 stainless steel annual output. The second stage was due to be operational in the next two years, he said.

"We already have the land, the equipment has arrived, and we have started (construction)," Suhartono said.

Virtue expects to consume about 18 million tonnes a year of nickel ore within the next three years, he said, which will be sourced from local mines.

Suhartono said a government proposal to set domestic mineral prices would not impact the smelter's operations "as long as we have long-term cooperation agreements" with miners.

($1 = 13,550 rupiah)

(Reporting by Wilda Asmarini; Writing by Fergus Jensen; Editing by Richard Pullin)

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