Indo Mines identifies location for pig iron plant, awaits export permit

By Puspita Maylana Devi

ASX-listed Indo Mines Limited recently stated it has renewed emphasis on pig iron production and a phased approach to iron concentrate production, stating that PT Jogja Magasa Iron?s, the company's subsidiary, has reviewed its implementation strategy and has concluded that the preferred location for the pig iron plant is at the western end of the Contract of Work (COW) area.

"As a result, JMI is required to resubmit its Feasibility Study to the Indonesian Government for approval of the amended site location. This process represents an amendment to the current approved study and does not impact the COW," the company said in a quarterly report ending March 31, 2013 submitted to the exchange.

Land negotiations to secure the site for permanent plant facilities and infrastructure, the company said, are progressing well with strong local support. JMI has so far produced approximately 10,000 tons of iron concentrate currently stockpiled at the Karangwuni site.

"Finalising customer off-take contracts and financing the concentrate phase of the pig iron project is dependent on securing an export permit for the sale of iron concentrate. However, Indonesian Government Regulation 7/2012 prohibits the export of mineral ores and raw materials effective from 1 January 2014. Indo Mines stated to continuously engage with the Indonesian government to an Export Permit.

"Should this regulation be maintained, then JMI will be unable to export concentrate. It would, however, be able to use concentrate in the production of pig iron for local and overseas markets.

Given the uncertainty regarding the exporting of concentrate, the Board of Indo Mines is now of a view that construction activities in relation to the production of iron concentrate will be placed on hold with expenditures curtailed and the company?s land purchase program realigned to the project implementation plan.

In the event that a successful conclusion is not forthcoming prior to 31 December 2013, the company?s Indonesian activity will solely focus on those elements that are directly related to the production of pig iron," it said.

If the Export Permit is issued at the end of December 2013, then first concentrate from the 500,000-ton facility would be expected in the last quarter of 2014, with the 2.OMtpa facility completed in the first quarter of 2016. Pig iron production would then follow around the first quarter of 2017.

To ensure the company?s ability to move rapidly into concentrate production, a vertical grinding mill ?(VTM1500) with capacity of 500,000 tons per annum, has been ordered from Metso USA. Further orders will be placed after receipt of the Export Permit.

In the event that the Export Permit is not issued, management will continue with studies and test work related to pig iron production. The company intends to seek joint venture partners to assist in the pig iron development and associated infrastructure. Equipment orders for pig iron production will occur in accordance with the project implementation plan.

In order to diversify its investments and to leverage its strong cash reserves of $46.9 million, the company has commenced looking at additional iron sand and heavy mineral opportunities outside of Indonesia, though it did not elaborate further.

The company has also appointed Hendra Surya to the role of Chief Operating Officer of Indo Mines.

Editing by Er Audy Zandri