Silkroad Nickel, an Indonesian nickel mining group, has entered into a non-binding memorandum of understanding (MOU) with Shandong Xinhai (Singapore), a subsidiary of Shandong Xinhai Technology.
Under the MOU, Shandong Xinhai is proposing to build and operate a Rotary Kiln Electric Furnace (RKEF) in Indonesia, which will be supported by a coal-fired power plant, for the production of up to 400,000 metric tonnes of ferronickel. The parties to the MOU have entered into exclusive discussions to form a partnership for the development and operations of the RKEF smelter facility to the mutual benefit of the Parties.
Salient terms of the Proposed Partnership under the MOU include the completion of a feasibility report and any necessary due diligence on the RKEF Project by both companies. If the RKEF Project is deemed to be economically feasible, the Parties will agree on the financing requirements for the RKEF Project and consider a proposal for Silkroad Nickel to invest or acquire at least a 30 per cent shareholding interest in a company to be incorporated in Singapore by Shandong Xinhai for the purposes of the RKEF Project.
Under the agreement, Silkroad Nickel will be the long-term supplier of nickel ore for the operations of the RKEF smelter facility, on terms to be agreed separately under a long-term offtake contract. In addition, Silkroad Nickel will be responsible for obtaining all necessary permits and licences as well as obtaining and managing the land required for the RKEF smelter facility.
Shandong Xinhai shall be responsible for the design, procurement, development, construction and operation of the RKEF smelter facility, including the provision of suitably qualified and experienced personnel.
Mr Hong Kah Ing, Executive Director and Chief Executive Officer of Silkroad Nickel said that he was pleased to have signed the MOU with Chinas largest producer of nickel alloy.
Shandong Xinhai is the only enterprise in China capable of co-producing electricity and ferronickel, with a production capacity of 10 billion-kilowatt per hour of electric power and 1.9 million metric tons of ferronickel, which accounts for over 50 per cent of Chinas total market share, said Mr Hong Kah Ing.
Shandong Xinhai has a permit to operate a RKEF smelter facility which meets the stringent environmental standards required in China and which can co-produce ferronickel alloy and generate electricity with a 1.4-gigawatt coal fired power plant. Silkroad Nickel shall be supplying the nickel ore required to operate the RKEF smelter facility and may consider investing in the Investment Company for the RKEF smelter facility. This would mark a further step towards our Groups strategy of becoming an integrated nickel mining company.
The MOU is not intended to be an exhaustive enunciation of the terms of the Proposed Partnership. The Parties will be working towards the signing of the definitive agreements before the end of 2019, which will be subject to, among others, the approvals of the board of directors and shareholders (if required) of the Company, any necessary regulatory approvals and the completion of a feasibility study to be approved by the Company.
The Company will make further announcements, in compliance with the requirements of the Singapore Exchange Securities Trading Limited Listing Manual Section B: Rules of Catalist, upon the execution of the definitive agreements.