The Straits Trading Company's subsidiary Malaysia Smelting Corporation has set aside 150 million ringgit as full provisions for its investment in PT Koba Tin.
Straits Trading's share of the provision, which is for the financial year ended Dec 31 last year, is about $24.5 million.
The provisions were made after Koba Tin's mining contract, or or contract of work (CoW) from Indonesia's government expired without an immediate renewal.
Koba Tin, which is 75 per cent held by Malaysia Smelting Corporation and 25 per cent by Indonesia's largest tin miner PT Timah, had earlier submitted an application for a 10-year extension of the contract of work which would run to the year 2023. Koba Tin had made several presentations to Indonesia's government in this respect.
But the government is still continuing with its evaluation of whether to extend Kona Tin's contract which expired on March 31, said an announcement from Malaysia Smelting Corporation on April 2.
In the meantime Koba Tin has been given permission to continue with production operations until the evaluation is over, which could take up to three months from April 1. But this is unclear whether this permission will make a difference to Koba Tin, which had suspended its operations since November after continued losses.
Malaysia Smelting Corporation, which is itself listed both in Singapore and Kuala Lumpur, had warned in February that its investment and liabilities would be adversely impacted, if the contact at Koba Tin was not renewed by March 31. When there was no renewal, Malaysia Smelting Corporation's board accordingly decided to make the full provision in its accounts.
Straits Trading and Malaysia Smelting Corporation shares were halted from trade for a short period in the morning for the announcement. During the session there were no transactions in Straits Trading shares while Malaysia Smelting Corporation shares rose one cent to $1.25.
Malaysia Smelting Corporation had announced in November last year that it will suspend the entire mining and smelthing operations at Koba Tin.
