Russia is to invest $3bn to build a nickel smelter in Halmahera Island, eastern Indonesia, as part of its plan to increase revenue from the country’s mining sector.

Indonesian Chief Economic Minister Hatta Rajasa said the construction would commence in the first half of 2011, reports Reuters.

According to Indonesia’s new mining and coal law, miners must carry out a minimum amount of processing before exporting.

Currently Indonesia produces ferro-nickel from three nickel smelters operated by Aneka Tambang and nickel-in-matte from smelters operated by PT Inco Tbk, a unit of Brazil’s Vale.

One of the world’s largest nickel producers, Eramet Group, has a nickel project in Halmahera in a joint venture with Indonesian state miner PT Aneka Tambang Tbk.