PT Vale Indonesia and Zheijiang Huayou Cobalt Company signed a deal to build a high-pressure acid leaching processing facility in Indonesia.
The plant will be located in southeast Sulawesi in Pomalaa.
Huayou will build and implement the HPAL project, while Vale will have the right to acquire up to 30% of Pomelaa HPAL's shares.
The HPAL facility will use Huayou's technology and configuration to process the limonite ore and saprolite ore from PT Vale's mines in Pomelaa. The facility will produce up to 120,000 tonnes of nickel per annum.
The HPAL facility will not use coal-fired power plants for any power source, both parties agreed.
Definitive agreements are expected to be signed within six months, Vale said.
"Huayou has proven track records in HPAL construction and operations in Indonesia," PT Vale Indonesia chief executive Febriany Eddy said.
"We appreciate that our partner comes along with our low-carbon agenda" by foregoing coal-powered plants, he added.
Indonesia holds the world's largest nickel reserves.