(Yicai) Nov. 11 -- GEM, a leading Chinese producer of battery materials, is joining forces with Brazilian mining giant Vale to build a zero-carbon nickel project in Indonesia, aimed at strengthening its global market position amid tightening trade rules.

GEM and Vale Indonesia signed a framework investment deal for a joint venture project in Central Sulawesi to process nickel laterite ores into mixed nickel-cobalt hydroxide precipitate, the Shenzhen-based firm said yesterday. The plant's design and construction will aim at achieving zero-carbon emissions.

GEM did not disclose the total investment amount, but said that its direct capital expenditure should not be more than CNY1.4 billion (USD194.8 million).

The facility will be able to turn out 66,000 tons of MHP a year 16 months after gaining construction permits. MHP is a major raw material for cathode precursors in ternary lithium-ion batteries. The JV also intends to eventually build downstream facilities to make precursor and cathode products.

The project will be built and operated by the JV in which GEM and other investors will hold a 70 percent stake, with Rio de Janeiro-based Vale owning the rest. The agreement stipulates that GEM's ownership will not exceed 25 percent. 

GEM is well-connected, having teamed up with both Chinese and foreign partners, such as South Korea's EcoPro, on joint battery material projects. It already runs plants and is building more in the nickel-rich nation of Indonesia to meet the country's regulations on local production while opting for a safer tariff environment to export products to the European Union and the United States.

This is not Vale's first battery materials project with a Chinese partner in Indonesia. The miner announced last December that it would join hands with Huayou Cobalt to jointly invest USD3.8 billion on a new facility there. Since Ford Motor is set to become the project’s main client, the IS carmaker has the option to buy into the venture later on.

Shares of GEM [SHE: 002340] closed 2.7 percent higher in Shenzhen at CNY7.59 (USD1.10) apiece, after gaining by as much as 3.5 percent earlier today. The benchmark Shenzhen Component Index added 2 percent.

Editor: Emmi Laine