France's Eramet announced a preliminary agreement with Chinese steelmaker Tsingshan Group to revive a nickel mining project in Indonesia that Eramet had frozen during a downturn in nickel markets.
According to a memorandum of understanding signed by the two groups, Tsingshan would become the controlling partner by acquiring 57 percent of Strand Minerals Pte Ltd., the entity currently wholly owned by Eramet and which in turn owns 90 percent of the Weda Bay project.
The initial agreement also called for the project to target an annual capacity of 30,000 tonnes of nickel ferroalloy, refined from ore mined at Weda Bay.Eramet, which unveiled the partnership in its 2016 results statement on Thursday, did not give any details on the expected timetable or investments for the project.
The French group had put the Weda Bay development on hold three years ago, citing low prices for the stainless steel ingredient and uncertainty over tax and ownership rules in Indonesia.
The Indonesian government has since banned exports of unrefined nickel ore, which along with recent environmental restrictions on mines in the Philippines have helped curb supply to China and supported a recovery in nickel prices.
The downturn in nickel prices left most of the industry operating at a loss in the past two years, including Eramet's New Caledonian unit SLN which benefited from a rescue plan last year including a 200 million euro loan from the French government.
Eramet said cost savings and improving prices, particularly in manganese, which is chiefly used in carbon steel, helped it swing to an operating profit in 2016, although it posted another full-year net loss.
It raised its target for group savings over 2014-2017 to 400 million euros from 360 million previously, and said it would announce in July new cost reduction targets for SLN for 2018-2020, in addition to a current plan to cut nickel costs by 25 percent by end-2017 compared with the 2015 level.
Eramet also announced that Chairman and Chief Executive Patrick Buffet would step down in May after 10 years leading the firm.The firm has nominated Christel Bories, a former CEO of aluminium products group Constellium (CSTM.N), to succeed Buffet and has named her deputy CEO with immediate effect.