Indonesia says Fortescue and Aoyama will invest billions of dollars in Borneo to build a metal smelting industrial zone

An Indonesian minister said Australia's Fortescue Metals Group and China's Castle Peak Holdings could invest billions of dollars in an industrial zone for metal smelting near a planned hydropower station on the island of Borneo.

The two companies have been in talks on the project since the start of the year, and Luhut Pandjaitan, the minister of maritime affairs and investment, said smelting of iron, nickel and copper ore at the estate could begin as early as 2023.

A slide show by Luhut in a speech on Tuesday showed that Fortescue could invest $12 billion, while Aoyama has the "potential" to invest $30 billion.

The minister said that the total investment, including the dam, would reach US $100 billion and would be completed within 10 years, adding that construction was scheduled to start in October.

Fortescue and Aoyama didn't immediately respond to requests for comment.

In September last year, Fortescue Future Industries (FFI), a subsidiary of Fortescue, signed an agreement to conduct a feasibility study on the industrial operation, potential domestic supply and export of hydropower and geothermal resources in Indonesia.

FFI has been announcing ambitious global green energy plans, mainly through green hydrogen. It plans to fund most of its projects off its balance sheet, with its own funds investing about $1 billion a year.

Aoyama has invested heavily in Indonesia, from industrial parks to stainless steel processing.

Indonesia, the largest nickel producer, has ambitious plans to start dealing with its rich supply of laterite nickel ore for lithium batteries and eventually become a global hub for the production and export of (EV) electric vehicles.

Miners and electric car companies are keen to ensure that their battery supply chains meet green standards and are hesitant to invest in coal-powered projects, which Indonesia's nickel smelters usually rely on.

The new metal smelter will be located near the 11000 MW Kayan hydropower project in North Kalimantan province on the Indonesian island of Borneo.