The project, which would become the European Union's only open-cast uranium mine if given the go-ahead, has faced local opposition since it was proposed.
Hydro, which is not interested in acquiring aluminium plants that use coal-fired power, was hoping the deal would be part of efforts to make its output as green as possible.
SMM said that it and nickel miner PT Vale Indonesia are conducting a feasibility study to build a nickel processing project in Pomalaa, Southeast Sulawesi.
The move makes the company the first mining major to request exploration permits in the country since President João Lourenço vowed to open up the sector and encourage foreign investment.
