Under the terms of the agreement, Silkroad will supply PT TBR with 15 million tonnes of nickel ore over a period of five to eight years, commencing from March 2020, delivering a minimum of 1.5 million tonnes of nickel ore annually. 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.
Based on the current domestic selling price by the Group, the total contract value of the Agreement is estimated to be in excess of S$400 million.
PT TBR is part of the Qingdao Hengshun Zhongsheng Group Co., Ltd. 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.
Mr Hong Kah Ing, Executive Director and Chief Executive Officer of Silkroad Nickel commented that this Agreement with PT TBR, which is building a new rotary kiln electric furnace smelter facility approximately 2 km from the Groups mine site in Sulawesi, gives Silkroad the impetus to not only ramp up production and start the exploration of new areas within the companys 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 Groups production volume of nickel ore.
As the agreement will only commence from March 2020, it 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.