The hydrometallurgical process of nickel laterite leaves a residue that still contains valuable elements. Its utilization can improve overall process efficiency and reduce environmental damage. In this work, the recovery of nickel and iron from nickel residue resulting from the citric acid leach process has been carried out by using the reduction followed by a magnetic separation process (RMS). The effect of reductant and additive dosage, reduction temperature, and holding time on metal grade and recovery, phase transformation, and microstructure of ferronickel has been investigated clearly. The nickel residue was mixed with 5–20 wt% of sodium sulfate and 0.1 to 0.5 of stoichiometric anthracite coal as additive and reductant, respectively. It was agglomerated into pellets with a diameter of 10–15 mm. The reduction process of pellets was conducted at 950–1250°C for 15 to 75 minutes. The reduced pellets were ground and put into a magnetic separation unit using a 500 Gausses magnetic field to produce the magnetic ferronickel and the non-magnetic impurities. The optimum result obtained by reducing the pellet contains 10 wt% of sodium sulfate and 0.1 of stoichiometric coal at 1150°C for 60 minutes, producing ferronickel has 5.74% and 73.18% of nickel and iron grade with 97.79% and 32.99% of recovery, respectively.