Silkroad Nickel bags long-term ore supply contract worth over $400m

SINGAPORE - A subsidiary of Indonesian nickel mining group Silkroad Nickel has signed a new offtake agreement estimated to be worth more than $400 million to supply 15 million tonnes of nickel ore over a period of five to eight years to PT Transon Bumindo Resources.

According to the contract, the group has to deliver a minimum of 1.5 million tonnes of nickel ore annually to PT Transon Bumindo Resources, commencing from March 2020.

PT Transon Bumindo Resources is part of the Qingdao Hengshun Zhongsheng Group, a Shenzhen-listed company that is majority owned by the Qingdao state government, which invests in Indonesian industrial parks, mining, and energy with a focus on electricity.

The selling price for each shipment of nickel ore will be based on the prevailing domestic Indonesian benchmark price for nickel after adjusting for the specifications of the nickel ore to be sold on a CIF (Cost, Insurance and Freight) basis.

The agreement is not expected to have any impact on the net tangible assets per share and earnings per share of the group for the financial year ending 31 December 2018.

Hong Kah Ing, executive director and CEO of Silkroad Nickel said that the agreement will give the group "impetus" to not only ramp up its production and start the exploration of new areas within its concession, but to also consider the acquisition of new concession areas.

In consideration of its obligations under the agreement and other offtake agreements of the group, Silkroad Nickel is currently in negotiations to finalise the appointment of a China state-owned company as the main mining contractor to increase the group's production volume of nickel ore.

The company will make further announcements if there are material developments on this matter.