The feasibility of ferronickel production from a low-grade limonitic laterite ore was investigated. The ore was first calcined and then prereduced in the solid state. The reduced ore was then smelted to produce ferronickel. The effects of coal addition, smelting temperature, and retention time on the process were investigated. Chemical and physical losses in the slag were separately quantified. Coal addition was the main parameter that controlled the ferronickel grade and losses in the slag. The melting point of the slag was well below that of the ferronickel, which enhanced metal-slag separation and minimized physical losses in the slag. A microstructural study of an industrial slag revealed that Cr-rich particulates, which were suspended in the slag, were mainly responsible for the physical losses in the slag.