Nickel Industries lands $943m placement as Indonesia seeks to boost nickel output, downstream processing

Nickel pig iron producer Nickel Industries (ASX: NIC) has jumped up the sector ratings after Jakarta Stock Exchange giant United Tractors has, as part of its ongoing diversification into the metal, agreed to invest $947 million in the Australian company’s Indonesia-based production base.

United Tractors is an indirect subsidiary of Singapore-listed Jardine Cycle and Carriage, part of the immense Jardine Matheson investment group which has its origins in trading commodities after establishing its base in Hong Kong in 1844.

Nickel Industries was, as Nickel Mines, listed on the ASX in 2018 but was established in 2007.

It describes itself as a “globally significant low cost producer of nickel pig iron, a key ingredient in the production of stainless steel”.

Its operations are all located in Indonesia.

Sharp premium to share price

Nickel Industries says the price being paid by United Tractors — $1.10 per share — represents a 27.2% premium to Nickel Industries’ last traded price.

The companies have executed a collaboration agreement as well as indicating they will plan potential future Indonesian nickel mining and processing initiatives.

United Tractors is one of the largest heavy equipment distributors and provider of mining services in Indonesia.

Jardine controls it through PT Astra International, the sixth largest company in Indonesia.

Big money going into Indonesian nickel

In 2022 United Tractors acquired a 50% stake two associated companies, PT Stargate Pacific Resources (a nickel miner) and PT Stargate Minerals Asia which is planning to build a nickel processing plant.

This is all in line with the Indonesian government’s drive to develop more nickel downstream processing in the country which would lead to the development of its own battery industry.

This deal with Nickel Industries is only the latest of recent major investments.

In April, the JSE saw laterite nickel miner Harita Nickel raise 10 trillion rupiah (about A$992 million) with its initial public offering. The company operates two mines on Obi Island in North Maluku province.

Three weeks later another IPO, Merdeka Battery Metals, debuted on the Jakarta bourse after raising the equivalent of A$873 million with its plans to develop a downstream existence, intending to build two high pressure acid leach plants (HPAL) to supply makers of battery metals used in electric vehicles.

United Tractors’ President Director Frans Kesuma said this new deal with Nickel Industries was another important step in the diversification of his company’s business.

“It builds on our integrated nickel strategy and our broader group’s continued expansion in the electric vehicle supply chain,” he added.

Chinese investment house backing new project

Nickel Industries also reports that Shanghai Decent Investment Company has confirmed its intention to raise production at the future Excelsior nickel project (ENC) from 67,000 tonnes to 72,000 tonnes without any additional capital cost.

The Chinese company is investing US$2.3 billion (A$3.43 billion) to earn up to 40% stake in the project.

This project will enable Nickel Industries to produce both nickel sulphate and nickel cathode, thus differentiating itself from other HPAL plants now under construction across Indonesia.

Nickel Industries’ existing operations are three rotary kiln furnace plants at the Morowali industrial park, the Angel nickel project at the Indonesia Weda Bay industrial park and the Hengjaya mine, a nickel laterite deposit which supports a large tonnage, high grade nickel operation.