Indo Mines seeks to formalize agreement with strategic partner

By Romel S. Gurky

ASX-listed Indo Mines Ltd said that it is seeking to soon formalize agreements with a potential strategic partner in developing a planned smelter project, which would process iron sand concentrates into finished steel in Kulon Progo Regency, Yogyakarta.

?The key stakeholders of the project, including the majority shareholder Rajawali Corpora, met in May 2017 and have agreed that the potential partner would add value to the project. An invitation has been sent to the potential partner to meet with the key stakeholders and formalize the agreements that have been negotiated,? the company said in a statement last week, but did not disclose the identity of the would-be strategic partner.

Indo Mines subsidiary, PT Jogja Magasa Iron (PT JMI) and its local partner PT Jogja Magasa Mining have been in discussions with a potential strategic partner since September 2016 to develop a trial smelter facility at the company?s Kulon Progo project.

Elsewhere, Indo Mines said that because of the unique nature of iron sand concentrate, the company is limited who it can partner with to develop a value add process.

Although specific details regarding negotiations with the potential strategic cannot be provided at this stage, a basic outline of the potential deal structure is provided below.

First stage of the partnership will see development of a trial furnace facility to process Kulon Progo iron sands to pig iron or finished steel. The strategic partner would finance and develop the furnace facility utilising their technology to process the iron sand concentrate. To provide feedstock to this facility PT JMI would develop a beneficiation plant.

Key advantages of this structure include the following;
1. Lower capital cost commitment and financial raising would be required from PT JMI.
2. Removes the need to obtain an export license for iron sand concentrate.
3. Allows retention of the existing Contract of Work and removes the need to covert to an IUPK license.
4. PT JMI can focus on the less technically sensitive mining and beneficiation rather than the hot-metal and steel production process.
5. The project is developed on a modular basis, and production capacity can be increased as market conditions allow.

Editing by Reiner Simanjuntak