Magnus Energy inks deals for nickel extraction in Indonesia

SUSPENDED stock Magnus Energy : 41S 0% has inked several agreements to enter the nickel extraction and supply business in Sulawesi, Indonesia, the Catalist-listed company said in a Thursday (Jun 30) bourse filing.

MEG Harta Indonesia (MHI), a wholly-owned unit of Magnus, on Jun 14 entered an agreement for the provision of the extraction and supply of nickel ore from mining sites in Kolaka in Sulawesi. MHI and another Indonesian private company, dubbed “Company A”, are buyers. The sellers are an entity owned by the Sulawesi regional government and 2 Indonesian private companies.

Magnus said that it is unable to disclose the identities of the parties for reasons of confidentiality, and also because it does not have the relevant consent from them.

The sellers have agreed to sell an initial quantity of 20,000 metric tonnes (MT) of nickel ore – with a possible addition or subtraction of 10 per cent, Magnus said. The buyers – MHI and Company A – have the option to increase the purchase quantity as the number of shipments grow.

MHI also entered another agreement on Jun 13 with Company A, for joint sales and transportation of nickel ore. Company A holds the licence to transport and sell the nickel ore. MHI will be responsible for sourcing the nickel ore and making it ready for shipment, bearing the cost of renting the jetty and loading the nickel ore to the barge or vessel. Both will cooperate for 12 months from the date of signing the agreement.

In addition, Company A entered an agreement, dated Nov 15, 2021, to sell the nickel ore extracted from Kolaka to a third-party smelting company. The agreement is for the sale of nickel ore up till Jan 15, 2023.

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Magnus’ management is planning for and confident that MHI will complete around 15 shipments of nickel ore to the smelter. Each shipment of cargo is expected to comprise 7,500 MT of nickel ore to be transported by barge to the smelter.

With these agreements and the required licences, MHI would be able to supply nickel ore of a more sought-after grade to the smelter, located in south-east Sulawesi, at Indonesia’s monthly mineral ore benchmark price, Magnus said.

“Accordingly, the board is of the view that the entry of the agreements is beneficial to the company and is a crucial step towards enhancing and demonstrating the business viability of the group,” the company added.

Funding for the Kolaka project will be internally sourced from Magnus’ available working capital. The business is expected to contribute positively to the group’s cash flow, but not expected to have a material impact on earnings per share for the current financial year.

Trading in shares of Magnus has been suspended since 2019.