Operations: The Popularity of PT Inco

Mining in Indonesia can be as much about community development as orebody development. PT International Nickel Indonesia (PT Inco) made that discovery when it began mining laterite ore near Soroako on the island of Sulawesi in the 1970s. PT Inco is owned roughly 59% by Inco, 20% by Sumitomo Metal Mining Co. Ltd., and 20% by public shareholders, almost 90% of whom are from outside Indonesia.

Because of their remote location, the production facilities are essentially self-contained. There is an open pit truck and shovel operation, ore screening, drying and reduction facility, and smelter. Both thermal and hydroelectric power-generating facilities have been created. In addition, PT Inco built and maintains a town site, roads, airport, and port facilities.

The lack of industrialization elsewhere in Indonesia makes PT Inco a very popular employer. The competition for jobs can be a problem. “More people have been migrating to our area in hopes of getting a job or making a living,” says PT Inco’s chief operating officer Ted Hodkin. “The increase and social stress of trying to get an edge to gain employment is currently the biggest issue we face. It is impossible to meet the needs of everyone.”

Each year the company generates over US$20 million for the Indonesian government in taxes, ore royalties, water levies, and employment income tax. Plus there are spin-off benefits for local contractors and suppliers to provide goods and services to PT Inco. “The people in our community and the governments at all levels are aware of this contribution, and understand the importance of maintaining the operation. We try to educate and foster that understanding,” Hodkin adds.

The company is very aware that its responsibilities go beyond paying taxes and wages. “We subscribe to the approach that we don’t give them fish, but we do give the know-how and capability to catch fish, so that they can sustain themselves. We have only 1% expats in our organization and 99% Indonesians. The key to our operation’s success is the development of the skills of our Indonesian employees,” says Hodkin.

The original Contract of Work between PT Inco and the government committed the company to funding local improvements. Since the company has a highly developed sense of community involvement, which is as much a part of the corporate culture as anything else, it has taken an affirmative approach. Each year it sponsors dozens of projects that improve the quality of life for the Indonesian people, at a cost of over US$1 million.

The projects are diverse. Asphalt roads, drainage systems and street lighting have been installed in local villages. The company supports agricultural work and rice growing. It has built a greenhouse and tissue culture laboratory. It supplies farm equipment, and finances seed and fertilizer purchases. In addition to these projects, the company also supplies five megawatts of power at a token charge into the Sulawesi Power Grid.

Health care is an important part of the company’s efforts. Free care is available at the PT Inco hospital for local people who otherwise could not afford it. Education and training are provided, in particular the education of paramedics for local health clinics. The company supports testing centres for food and drugs. Government health centres have also been renovated with the help of PT Inco.

Educational initiatives include primary, trades, and university programs. Schools in remote villages have been renovated, teachers have been trained to staff them, and additional allowances given to the teachers. PT Inco provides a building, tools, and work for skills development such as welding and light vehicle maintenance. The company sponsors a co-operative program for university students and provides support for graduate and post-graduate students writing theses in metallurgy, hydroelectric power generation, engineering, and other nickel mining-related activities.

Expansion Upped Output 50%

Between 1995 and 1999, PT Inco expanded its operations by 50% to 150 million pounds of nickel annually. The project cost US$633 million and involved all sectors of production.

Larger trucks and shovels were bought for the mine, and a new screening facility was built in the pit. The move to larger mining vehicles allows better parts inventory management and simplified employee-training requirements and higher efficiency.

The processing plant was expanded, beginning with the addition of a new 5.5-m diameter by 65-m long rotary ore drying kiln. Next came a new 5.5-m diameter by 135-m long reduction kiln, which produces calcine for the smelter. A fourth electric smelting furnace was added, and the existing three were upgraded. Another Pierce Smith converter and a product dryer were also installed. The smelter produces high-nickel matte, which is sold directly to the Japanese and Asian markets. (Some of the product is shipped to Korea and Taiwan after partial processing in Japan.)

At the same time as the mining and smelting capacity were expanded, the port and other infrastructure was upgraded to handle the increased volume.

The increased nickel output required a corresponding increase in electricity. To meet demand a new 93-MW hydroelectric dam was built at a small village called Balambano–PT Inco’s second hydroelectric generating station. The company also has two fuel-fired power stations. The new dam was built of roller-compacted concrete because this construction technique allowed the spillway and power intake to be built into the body of the dam as it was erected. The dam, spanning the Larona River, is 92-m-high, 352-m long at the crest. The upstream face is sealed with a membrane. It is 6-m-thick at the top, except on the left-centre where it is 8-m-thick to allow for the installation of the spillway gates. There are three spillways, each with a computer-controlled radial gate. The powerhouse is on the left bank and contains two vertical turbines and synchronous generators. A 24-km-long, 150-kV transmission line carries power to the smelter.

PT Inco and the Government of Indonesia have negotiated a Contract of Work that runs until 2025. The orebody has the reserves to support the operation well beyond that time. At the end of 2001, there were 55 million tonnes of proven reserves grading 1.66% Ni. An additional probable reserve of 42 million tonnes at 1.74% Ni had also been delineated.

The outlook is good for both PT Inco and the people of Indonesia. The company benefits from the development of low-cost resources. The country benefits in both monetary and human development terms.