Antam says repair of nickel smelter takes three to four months

State owned publicly listed mining firm PT Aneka Tambang Tbk.(Antam) announced Tuesday that the investigation into the technical problem which caused an accident at its Pomalaa FeNi I ferronickel smelter on Tuesday, July 17, 2001 was caused by a fracture in one of the nipple pressure rings, which were used to support the contact clamp, in one of the furnace's three electrodes.

This accidental damage, said the company in its statement, allowed water from the cooling system to seep into the furnace, which was subsequently trapped in the calcine (hot ore) layer above the surface of the slag, or waste material, causing an explosion within the furnace. Water trapped beneath calcine can create volatile conditions in temperatures that may exceed 1000 degrees centigrade.

According to Antam, the explosion damaged 50 percent of the water coolant system in electrode and FeNi I's roof was damaged as 80 percent of the fireproof insulation bricks were dislocated when segments of the cover beam used to support the bricks were dislodged. The bricks will need replacing but the cover beam is still usable.

Antam determined that the extent of the damage does not warrant replacing the furnace, which can be repaired. Repairs have begun and are estimated to last three to four months, during which, FeNi I will be un-operational, reducing Antam's monthly contained nickel in ferronickel output by 420 tons per month. In order to prevent future leaks and possible accidents, Antam will replace all the nipple joint pressure rings on each of FeNi I's three electrodes.

Losses due to equipment damage are estimated at Rp 40.0 billion (approx US$ 4.3 million), while lost sales revenue is estimated at US$10.7 million (assuming a nickel price of US$6,393/ton and four months of stoppage). The smelter holds All Risk insurance from PT Asuransi Parolamas for both Property Damage and Business Interruption. It is anticipated that Antam will recover its material and revenue losses within 6 months.

In order to uphold existing ferronickel supply contracts, Antam will use the toll system whereby Antam will send its nickel ore for processing by a third party, with the resulting ferronickel delivered to Antam's customers. The same system was used successfully during the relining of the FeNi I plant in 1987. Antam will attempt to offset revenue shortfall by increasing the sales volume of other commodities, in particular the export of nickel ores.

A special team that left for Pomalaa immediately following the accident conducted the investigation. Their findings are based on a thorough inspection of the damaged furnace as well as a review of the operational reports for the week prior to the accident. They conclude that proper procedures were being followed and the furnace was operating normally.(alex/godang)