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Antam, a state-owned mining and metal company, has signed an agreement with Australian miner Direct Nickel that could lead to the development of Indonesia’s first nickel laterite processing plant, the companies announced on Monday.

The deal follows a pilot project that involved testing a 200-ton nickel laterite sample provided by Antam to a Direct Nickel (DNi) test plant in Perth.

Subject to the test results, the companies have agreed to work together to find a location to build a plant in Indonesia.

“Antam’s cooperation with DNi promises to significantly improve the efficiency of nickel laterite processing,” Antam president director Tato Miraza said in a statement on Monday. “The agreement signed today reflects our undertaking to add value to Indonesia’s vast nickel reserve industry and to support the company’s sustainable growth.”

Direct Nickel chief executive Russell Debney said: “DNi’s strategy is to roll out the revolutionary DNi process technology in partnership with world-class mining companies that have nickel resources and in-house capability to take advantage of the looming nickel supply shortfall and the world’s increasing dependency on nickel laterite ore.

“We are pleased to continue building our partnership with Antam and to assist in the development of the significant nickel laterite opportunities in Indonesia.”

Direct Nickel, whose core business is extracting nickel from laterite deposits, said the deal with Antam is key to the company’s plan to create one of the world’s largest nickel production facilities.

Antam, 65-percent owned by the Indonesian government, is an integrated mining company whose products include ferronickel, nickel ore, gold, silver, bauxite and coal.

Apart from seeking to build the first nickel laterite, Antam is also undertaking a ferronickel factory expansion in Pomalaa, Southeast Sulawesi.

Currently the company produces 18,000 to 20,000 metric tons of nickel contained in ferronickel annually from the Pomalaa plant. After the estimated $590 million expansion project is complete, capacity will rise to 25,000 to 27,000 tons of ferronickel each year.

Antam currently operates nickel mines in Pomalaa and Tapunopaka, both in Southeast Sulawesi, and Tanjung Buli andPulau Pakal, both in North Maluku.

Other major projects include developing a $1.6 billion ferronickel project in East Halmahera, North Maluku, and a $350 million to $400 million nickel pig-iron project in Mandiodo, Southeast Sulawesi.

The company is also developing a $450 million chemical-grade alumina plant with an annual capacity of 300,000 tons in Tayan, West Kalimantan, which is expected to start production in October.

An executive at the company said it plans to sell Rp 1 trillion ($993 million) worth of bonds by December, with the proceeds used to help finance the expansion of the nickel project in Pomalaa.

Antam reported a 22 percent increase in its unaudited net income to Rp 462 billion in the first quarter of 2013 from a year earlier.