Silkroad Nickel plans to build, operate ferronickel smelter with Shandong Xinhai

SINGAPORE - Catalist-listed Indonesian nickel miner Silkroad Nickel is proposing to partner Shandong Xinhai (Singapore), a subsidiary of Chinese nickel alloy producer Shandong Xinhai Technology, to build and operate a ferronickel smelter facility in Indonesia.

They are looking to develop a rotary kiln electric furnace (RKEF), which will be supported by a coal-fired power plant, to produce up to 400,000 tonnes of ferronickel.

Silkroad Nickel said on Thursday night that it had inked a non-binding memorandum of understanding (MOU) with Shandong Xinhai for this smelting project. Both parties will work towards the signing of definitive agreements before the end of this year.

The MOU stipulates that Silkroad Nickel will supply the nickel ore required to operate the smelter, on terms to be agreed separately under a long-term offtake contract.

Silkroad Nickel will also be responsible for obtaining the necessary permits and licences, as well as to obtain and manage the land required for the smelter. It will also design, procure, develop, construct and operate the smelter, including the provision of qualified and experienced personnel.

A feasibility report and due diligence on the RKEF project will need to be completed by both parties.

If the project is deemed economically feasible, both companies will agree on its financing requirements. Silkroad Nickel may consider acquiring at least a 30 per cent stake in an investment company to be incorporated in Singapore by Shandong Xinhai for the purposes of the project.

Hong Kah Ing, executive director and CEO of Silkroad Nickel, said: "This would mark a further step towards our group's strategy of becoming an integrated nickel mining company."

Shandong Xinhai accounts for more than 50 per cent of China's total market share of ferronickel, and has a permit to operate a RKEF smelter facility which meets China's stringent environmental standards, Mr Hong said.

The MOU does not have any material impact on the earnings per share and net tangible assets per share of Silkroad Nickel for the current fiscal year ending Dec 31, 2019.

Shares of Silkroad Nickel last traded on Tuesday at 20 cents.