Inco considers bonds to finance expansion

The Indonesian unit of Canadian nickel producer Inco Ltd. is considering issuing bonds as an option to help finance business expansion this year, the chief of the company said on Wednesday as reported by Reuters .

One of the plans on the miner's expansion list is a third dam at a mining area in Sulawesi to boost production amid expectations of an increase in global demand for nickel, the main raw material for stainless steel.

The dam, expected to cost $250 million, is scheduled for completion in 2009 and is seen raising production of nickel matte to about 200 million pounds a year from an expected 167 million this year.

The Indonesian miner said last month it planned $151 million in capital expenditure this year, up 42 percent from $106 million in 2005, for business expansion.

"For capital expenditure, we will use internal funds. But there is also the possibility of seeking loans or issuing bonds. We are still studying the amount and timing," president director Bing Tobing told reporters.

He did not say how much International Nickel Indonesia Tbk PT (Inco Indonesia) hoped to raise, but industry sources said last year Inco could raise around $300 million by issuing global bonds, with tenors between 5 and 10 years, to help finance business expansion.

The planned expansion comes as Inco Indonesia predicted last month that global demand for nickel will rise 3-4 percent this year due to a 6-7 percent increase in demand for stainless steel. Tobing said the company was still waiting for government permits before it began the dam project.

"We are still waiting for permits from the forestry ministry. Once the permits are issued, we will go ahead. We want it to start as soon as possible," he said. (*)