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An Email interview By Olivia Alonso of the Brazilian News Paper, Valor Econômico S.A. with Steven, a member of the family of PT. Indoferro.

Posted Friday, April 19th 2013

Olivia
Is Indoferro the first NPI producer outside China?

Steven
Yes, China reinvented an old process that was developed many years ago but was in this day and age considered of little benefit as it utilises low grade laterite nickel ores. The Chinese proved it could be processed economically by producing nickel pig iron with nickel around 4% to 8% and most of the rest iron. Indonesia has between 17/20% of the worlds laterite nickel ore deposits and with the Indonesian government restricting the export of unprocessed nickel ore, and the owners having close cooperation with Chinese technicians, it became a perfect opportunity to capitalise on the Chinese know how, the local availability of nickel ore and the blast funace that was in the early stages of construction.

Olivia
Indoferro's NIP production facility is located at Cilegon Banten, right? How much did the company invest in this plant?
Steven
Yes the production facility is located in Banten close to the port of Merak. The overall investment will be around USD300 million when stage one and two are completed.

Olivia
The further US$ 100 million is going to be invested in the same facility?
Steven
Yes, the stage two is estimated to require USD100 million to complete. This is to install a second blast furnace and to introduce further refining to reduce the posphurous, carbon and silicon levels for customers that require tighter control of the elements. We intend to be able to supply "tailor made" product within the constraints of the processes.

Olivia
Are your customers all Chinese?
Steven
Non of our customers are from the People's Republic of China although we do export to several customers in Taiwan.

Olivia
Do you intend to sell NPI to other countries?
Steven
We are currently suppling to Taiwan, India, Europe and South Africa. We are very keen to include South America and North America in our customer base.

Olivia
What is the nickel content in NIP produced by Indoferro?
Steven
We produce, depending on the customers requirement, from 2% nickel pig iron up to 4.5% so far. When we have further refining we expect to produce much higher nickel contents.

Olivia
What was Indoferro's NPI production volume last year? (in tonnes)
Steven
Last year was only start up and commissioning. We then idled the blast furnace untill March this year and we are now ramping the production. Commercial production only really started at the beginning of April this year so figures are not yet available. We expect to be able to produce 10,000 MT of nickel per annum contained in 250,000 MT of nickel pig iron from stage one and double this when stage two comes online.

Olivia
What are your expectations for this year?
Steven
For the facility, install further refining equipment and start the installation of the second blast furnace. For marketing, we would like to penetrate the markets of North & South Americas, particularly Brazil.

Olivia
What was the company's revenues in 2012? And the forecast for 2013?
Steven
At this stage this is confidential

Olivia
What other products do you make, besides NPI? For PT. Indoferro we only make one product, nickel pig iron although our group manufactures steel long products in our steel mill, large castings in our foundry, CPO and refined palm oil, confectionary and "green" electric power production in our three power plants, to name a few.

Olivia
What are the elements in NIP composition?
Steven
Ni, Cr, C, Si, Mn, P, S, Cu, Pb, Fe are the elements we test for. Actual compositions can be seen on our website.

Olivia
Why do you believe the NPI production has grown so much in recent years?
Steven
A more competitive price over conventional sources and in recent years the high cost of pure nickel made the nickel pig iron process more economical.

Olivia
Why have the company decided to produce NPI?
Steven
Because we have the the raw materials and the right location. The political decission to only allow value added exports of nickel to protect national resources also gives certain advantages.

Olivia
Does Indoferro believe in an increase in NPI demand worldwide? What is your estimate for global demand?
Steven
The increased use of nickel pig iron is inevitable while we can produce with a cost benefit over the use of ferro nickel or pure nickel brickettes. There is also the probability of others entering the market as well. Global demand, of course, is tied to the health of the large world economies. With much of the world economies struggling at the moment and the economists apparently unable to reliably predict it is difficult to give accurate estimates.

Olivia
How is NPI price defined? Is there a relation with nickel prices at stock exchanges?
Steven
We use LME and other sources to obtain the prevailing price for nickel and other elements we use to determine our base price. We then structure our price so that our nickel pig iron always gives a competative advantage to our customers over other sources of nickel.

Olivia
Thank you so much for your answers, your time and attention.
May I ask you two more questions?
Steven
Of course

Olivia
Do you believe the increase of NPI consumption will contribute to keep nickel prices under pressure? since NPI is used as a substitute of nickel, right? Steven
Obviously, any fresh source of nickel as a usable substitute for pure nickel or ferro nickel is likely to stabilise or even reduce the price depending on the prevailing market.
At this moment nickel prices are taking a downward trend, probably because of the weakness of the major markets. We expect, given time, that these markets will improve, and so will the price.
Previously analysts have indicated that the nickel market price should find an equilibrium at around the USD16,000 mark but predictions are sometimes incorrect. If we could accurately predict the markets we would all be millionaires :), :) .

Olivia
Will your project have a third stage of investments?
Steven
Yes, there are plans in the making for further stages to the project but as to the value of those investments they remain confidential at present.


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