China Hanking to resume SE Sulawesi nickel production
Tuesday, February 7 2017 - 04:45 AM WIB
Hong Kong-listed China Hanking Holdings Limited said its Indonesian subsidiary PT Konutara Sejati (KS) has recently signed an agreement with PT Maha Bhakti Abadi (MBA) to resume production at the former?s laterite nickel project located in North Konawe Regency, Southeast Sulawesi Province.
China Hanking said in a statement on Monday that under the agreement, signed on February 2, MBA will manage nickel mining, production and trading of nickel commodities from part of KS?s nickel mining area of the nickel project.
KS suspended production at the nickel mine in early 2014 after the Indonesian government introduced a ban on export of mineral ores including nickel ores in a bid to push miners to build domestic smelters. As domestic nickel smelters have been developed, local demand for nickel ores increases, prompting KS to seek partners in a bid to resume nickel production at its mining area (working area).
China Hanking provided further details of the agreement between KS and MBA in the statement as follows.
Pursuant to the Cooperation Agreement, MBA is authorized to sell the nickel which is produced from the Working Area on behalf of KS and MBA shall share the profit generated from the sale of the nickel with KS.
MBA shall share the profit with KS in the following manner:
(a) assuming that the selling price for nickel ore with nickel ore content of 2.00% is US$32 per wet metric ton (?WMT?), then:
(i) for nickel ore content of 2.00% or above, MBA shall pay KS US$4.5 per WMT;
(ii) for nickel ore content of 1.90% to 1.99%, MBA shall pay KS US$3.5 per WMT; or
(iii) for nickel ore content of less than 1.90%, the profit sharing between MBA and KS shall be further discussed.
(b) assuming that the selling price for nickel ore with nickel ore content of 2.00% is lower than US$30 per WMT or higher than US$32 per WMT, then the profit sharing between MBA and KS in relation to the price difference will be adjusted based on a 7:3 ratio.
The Cooperation Agreement shall remain in effect until March 2018 unless a party intends to extend the period notifies the other party in writing at least 30 days prior to the end of the term (the ?Working Period?). MBA may be granted an extension of the Working Period for not more than five months due to weather conditions. MBA shall mine and sell at least 1,500,000 WMT of nickel ore containing 1.9% or above nickel during the Working Period.
MBA shall pay a deposit fund in the amount of US$300,000 to KS (the ?Deposit Fund?). The Deposit Fund shall be satisfied by MBA to KS in the following manner:
(a) a sum of US$200,000 shall be paid by MBA to KS within 3 working days upon signing of the Cooperation Agreement (the ?First Payment?); and
(b) a sum of US$100,000 shall be paid by MBA to KS within 6 weeks subsequent to the First Payment.
KS shall refund the Deposit Fund to MBA within 3 working days upon the expiry of this Cooperation Agreement.
Elsewhere, China Hanking said in the statement that on February 2, KS, as seller entered into a sale and purchase agreement (?S&P Agreement?) with an independent third party as buyer (the ?Buyer?) pursuant to which KS will sell 100,000 metric tons of nickel ore to the Buyer at a total consideration of (i) US$1 million, in the event that the Buyer requires to utilise the port which is owned by an affiliate of KS (the ?Port?) for transporting the nickel ore; or (ii) US$ 900,000, in the event that the Buyer does not require to utilise the Port for transporting the nickel ore (the ?Consideration?).
The Consideration shall be satisfied by the Buyer to KS in the following manner:
(a) a sum of US$350,000 shall be paid by the Buyer to KS within 3 days after signing of the S&P Agreement;
(b) a sum of US$150,000 shall be paid by the Buyer to KS within 3 weeks after signing of the S&P Agreement (the ?Second Payment?);
(c) a sum of US$500,000 (in the event that the Buyer requires to utilise the Port) or a sum of US$400,000 (in the event that KS does not require to utilise the Port) shall be paid by the Buyer to the KS within 2 months after the Second Payment.
Editing by Reiner Simanjuntak