Silkroad Nickel inks heads of agreement for joint venture to build smelter facilities in Sulawesi

CATALIST-LISTED Indonesian nickel mining group Silkroad Nickel announced that its subsidiary PT Teknik Alum Service (PT TAS), and PT Artabumi Sentra Industri (PT ASI) have entered into a non-binding heads of agreement with PT Anugrah Tambang Smelter for its entire equity interest.

Through the acquisition, it aims to build and operate smelter facilities for the production of nickel pig iron on the group's mine site in Sulawesi, Indonesia. PT Anugrah Tambang Smelter, a limited liability company established under Indonesian law, holds valid principle and location permit licences for the construction of a smelter factory in Buleleng Village, Bungku Pesisir Subdistrict, Morowali Regency, Sulawesi, Indonesia.

PT Anugrah Tambang Smelter has an issued share capital of 12.5 billion rupiah (S$1.2 million) and is 99 per cent owned by PT Bina Mitra Serasi (PT BMS) and 1 per cent owned by Hong Kah Ing, executive director and CEO of Silkroad Nickel.

According to the agreement, PT TAS and PT ASI will acquire 30 per cent and 70 per cent of PT Anugrah Tambang Smelter, respectively. PT TAS will have an option to purchase 21 per cent of the shareholding interests in the target from PT ASI upon fulfilment of certain conditions.

PT TAS will provide PT Anugrah Tambang Smelter with a shareholder loan of US$1 million for working capital purposes, and will be responsible for management of the land, operating and environment licences; providing access of its jetty; and community socialisation.

PT ASI will also provide PT Anugrah Tambang Smelter with the necessary smelter equipment, machineries and technical knowledge to build and operate a smelter facility, and the cost of such equipment and machineries will be determined mutually by the purchasers following a third-party independent valuation of the equipment and machineries.

The cost of equipment and the shareholder's loan will be repaid to PT ASI and PT TAS, respectively, from its profits. PT TAS also has the rights to appoint the general manager and finance director of PT Anugrah Tambang Smelter.

Mr Hong said: "We are pleased to announce the signing of the agreement to build and operate the nickel smelter plant at our mine site. This marks the group's foray into a downstream cost efficient mine mouth business and is a step towards our group's strategy of becoming an integrated nickel mining company."