OMH approves $501m Malaysian ferroalloy smelting project

8th November 2011 By: Esmarie Iannucci - Creamer Media Senior Deputy Editor: Australasia

PERTH (miningweekly.com) − The board of manganese producer OM Holdings (OMH) has approved the development of the Sarawak ferroalloy smelting project, in Malaysia, following the completion of a definitive feasibility study (DFS).

The DFS found that a capital investment of around $501-million would be needed to fund the 600 000 t/y ferroalloy project. The production would consist of 310 000 t/y of ferrosilicon alloys and a further 290 000 t/y of manganese ferroalloys.

Commercial production at the Sarawak project would be executed in a phased ramp-up basis, with construction expected to start in the third quarter of 2013. Production from the smelting project is expected to start no later than the first quarter of 2014, with full commercial production scheduled to be reached by the second quarter of 2015.

The Ministry of International Trade and Industry of Malaysia in September issued a manufacturing licence to OMH for the production of sintered manganese ore and ferrosilicon, silicon manganese, high-carbon ferromanganese and refined ferromanganese.

The company has also started a detailed environmental-impact assessment process by submitting the terms of reference to the Department of Environment.

The assessment would likely be completed by the second quarter of next year.

Meanwhile, OMH said in a statement on Tuesday that funding for the project would be structured through a 70% project financing facility, and 30% equity funding, provided by OMH and its joint venture partner Cahya Mata Sarawak Berhad.

OMH, which owns 80% of the project, would need to put in $120-million, which it planned to fund from surplus funds from a five-year $125-million term facility currently being negotiated, the divestment of noncore ASX-listed investments, and if required, a capital raising to strategic investors.

OMH was further looking to secure 60% of the project’s production by way of offtake agreements with major steel mills in Asia, Europe and North America by mid-2012, in alignment with completing the project financing.

The Sarawak vehicle was in advanced discussions with a number of major steel mills, marketing agents and distributors regarding specific product offtake agreements covering both product-specific and geographical sales targets and objectives.

The Sarawak vehicle has further signed a memorandum of understanding with JFE Shoji Trade Corporation of Japan for potential direct equity investment in the ferrosilicon production capacity, along with an offtake agreement for up to 100 000 t/y of ferrosilicon product produced at the Sarawak project.

The parties were in the final stages of finalising a term sheet, following which JFE’s due diligence process would start.