Inco ups power plant cost estimate

Sulawesi nickel miner PT International Nickel Indonesia Tbk (PT Inco) announced on Tuesday it has approved a revised capital cost estimate of US$410 million for the Karebbe hydroelectric generating facility on the Larona River from original estimate of 275-280 million.

According to the company, the higher estimate is primarily due to increased prices for equipment, commodities and project labour.

The economics of the project remains very robust in this era of high energy costs, the company said

The Karebbe Project was first announced in October 2004 as a part of the company?s capital program to raise annual production to about 90,718 metric tons of nickel in matte or 25 per cent above current design capacity.

Construction on the Karebbe Project was suspended in January 2006 but resumed on October 1, 2007 following the issuance of the forestry permit in late August 2007. The new estimate accounts for higher prices and associated costs of delays, and reflects a more sound assessment of costs given that significant work on procurement, engineering and construction has been completed on the project to date, it said.

?We currently anticipate that the Karebbe Project will be operational in the first half of 2011. The Karebbe Project is expected to raise PT Inco?s hydroelectric generating capacity by 90 megawatts to 365 megawatts from the current 275 megawatts,? the company said.

?The project will substantially reduce the unit cash costs of nickel in matte production by lowering the reliance on expensive thermal power generation which has been used during the recent high metal price cycle to allow for increased nickel production. In addition, the Karebbe Project will also reduce energy supply risk in years of low rainfall,? it added.

Inco's major shareholders are CVRD Inco Ltd. with a 60.8% stake, and Sumitomo Metal Mining Co. Ltd. with a 20.1% stake. (alex)