Indonesia is a country with the largest nickel reserves in the world, which are concentrated on the islands of Sulawesi and Maluku. Geologically, the islands of Sulawesi and Maluku were formed by intense tectonic activity, which made it possible for nickel deposits to occur. Volcanic activity and volcanic eruptions contribute to the creation of an environment rich in metals and minerals, such as nickel and gold. This attracts multinational investors in the nickel industry to invest in Indonesia, specifically nickel mining on the islands of Sulawesi and Maluku.
The raw material for producing nickel is nickel ore. Based on the type, nickel ore is divided into lateritic nickel ore and nickel sulfide ore. Laterite nickel ore is concentrated in the world’s equatorial belt, such as Indonesia and the Philippines. Meanwhile, nickel sulfide ore deposits are located in countries such as Russia, Canada and South Africa. The production of both types of nickel metal has grown rapidly over the last three decades. This is driven by reduced reserves of high-grade nickel sulfide, most of which are deep underground, requiring large mining costs. Investment in nickel mining requires large amounts of funds, supporting technology, and a competent workforce.
Based on the content of grades in the nickel ore, laterite types are divided into limonite nickel ore and saprolite nickel ore. Limonite nickel ore has a lower nickel content than saprolite nickel ore. However, in the limonite nickel ore, there are various associated minerals, such as cobalt and scandium. Cobalt in the form of cobalt sulphate is one of the raw materials for battery precursors, while scandium is a rare earth metal used in advanced technological applications, such as the manufacture of fighter aircraft bodies.
Based on the class, nickel is divided into class one nickel and class two nickel. First-class nickel is used as a raw material for battery cathodes, while second-class nickel is used as a raw material for stainless steel. Nickel derivative product included in class one nickel is cathode nickel (99% Ni), while nickel derivative products included in class two nickel are nickel pig iron (10–15% Ni) and ferronickel (15–40% Ni).
Classification and Formation Process of Nickel in Indonesia
The type of ore used as a raw material determines the technology used in the nickel production process. In the practice of operating a smelter, the mixing of two types of ore with a certain composition is often carried out to suit the existing technology and availability of ore. In general, limonite nickel ore is processed using High Pressure Acid Leaching (HPAL) technology, which involves the use of sulfuric acid in a pressurized tank called an autoclave.
HPAL technology was chosen to process limonite nickel because the ore has a relatively low magnesium oxide content when compared to saprolite nickel ore. The high presence of magnesium oxide will consume sulfuric acid, thereby increasing the required production costs. The resulting product is a semi-finished product, namely Mixed Hydrogen Precipitate (MHP) or Mixed Sulphur Precipitate (MSP). The resulting semi-finished product can be sold immediately or further processed to produce nickel sulphate and cobalt sulphate.
Figure 1. MHP Production Process Flow with HPAL Technology (Source: Gustama et al., 2021) Design of a Nickel Extraction Plant with HPAL Technology
Saprolite nickel ore is processed using Rotary Kiln-Electric Arc Furnace (RKEF) technology, which involves the use of coal as a reducing agent in a high-temperature smelting process in an electric arc furnace. Nickel ore from the mine will enter the rotary dryer to reduce the moisture content in the nickel ore, and then the nickel ore will enter the rotary kiln to be mixed with coal. In the rotary kiln, nickel oxide and iron oxide will be partially reduced to nickel and iron metal. Furthermore, the smelting process takes place in an electric arc furnace, which involves high temperatures to further reduce nickel and iron oxides. The resulting product is in the form of nickel pig iron, or ferronickel, which is the raw material for stainless steel.
Figure 2. Flow of Ferronickel Production Process with RKEF Technology (Source: Crundwell, F., et al., 2011, Ext. Metallurgy of Ni and Co.)
Licensing for Nickel Business Activities
In carrying out nickel mining and processing business activities, permits are required in the form of Mining Business Permits (IUP) and Special Production Operation IUP for Processing and/or Refining. The granting of IUP based on PP No. 23 of 2010 is carried out by means of an application for a region by submitting it to the Minister of Energy and Mineral Resources, the Governor, or the Regent or Mayor in accordance with their respective authorities.
According to Law of the Republic of Indonesia No. 3 of 2020, Article 40, every business entity, cooperative, or individual can have more than one IUP provided that the IUP is owned by a State owned company (BUMN) or IUP for non-metal mineral and/or rock commodities. This can be interpreted as meaning that every non-BUMN business entity, cooperative and individual can only have one IUP for metal commodities.
Nickel processing activities are regulated in the Regulation of the Minister of Energy and Mineral Resources of the Republic of Indonesia No. 7 of 2020 concerning Procedures for Granting Areas, Licensing, and Reporting on Mineral and Coal Mining Business Activities. Business entities, cooperatives, or individuals must meet administrative, technical, environmental, and financial requirements. Administrative requirements include the deed of establishment of the business entity along with approval from the competent authority, the profile of the business entity, the Tax Payer Registration Number (NPWP) of the business entity, a trading business license, a company registration certificate and other company legalities.
In terms of technical requirements, a document for the construction and development of facilities and infrastructure, as well as a feasibility study document for processing and/or refining activities, is required. Approval of an environmental impact analysis document (AMDAL) is also required to comply with environmental requirements.
Financial requirements include the latest year’s audited financial statements, financing and investment plans, statements of ability to comply with laws and regulations, as well as corporate income tax return (SPT) for the last two years.
The process of auditing nickel processing and refining business activities includes various aspects such as checking inventory stocks, checking raw materials, and checking finished products using the sampling method. An effective sampling method is carried out so that the sample taken can represent the overall object being analyzed. In addition, it is necessary to carry out a metallurgical analysis of ferronickel products and raw materials to determine the nickel content. The calculation of raw material stocks can use imaging methods with three-dimensional scanning to determine the volume of the nickel ore stockpile.
Sustainability of Nickel Industry Development
The development of companies engaged in the nickel industry is inseparable from the support of various parties, including the government and supporting business actors. The government is pursuing policies that support the nickel industry in Indonesia, such as facilitating business establishment and protecting nickel resources in Indonesia, including down streaming nickel ore into nickel pig iron and ferronickel before export-import transactions.
On the side of supporting business actors, services that support effectiveness and efficiency in the entire nickel trading process are needed. Ranging from mining, processing, and warehousing to distribution, such as logistics services and other professional services in an operational and financial context. All nickel industry stakeholders must think about the sustainability of the nickel industry for the benefit of the global community.
In 2023, the European Union will classify nickel as one of the strategic raw materials that plays a vital role in the battery industry. In an effort to support the Paris Agreement to achieve net zero emissions by 2050, countries around the world reached a consensus to make changes in energy consumption patterns towards the use of renewable energy, one of which is through the battery industry to produce energy storage facilities and electric vehicles. This change can also be seen in the rapid growth in electric vehicle production, which has increased global demand for nickel. Vale SA, a mining company from Brazil, predicts world demand for nickel will reach 6.2 million metric tons by 2030.
SW Indonesia is a network of accounting and consulting firms that have served multinational companies in the nickel industry in Indonesia. SW Indonesia continues to develop competence and capacity to support our clients in the nickel industry. SW Indonesia’s professional development is aimed at improving the quality of services, both audit and other assurance services, taxation and customs, deals and corporate actions, as well as digital transformation and cybertrust.
