Malaysia Smelting Corporation has announced changes to a strategic alliance with an Indonesian group which could result in its shareholding in PT Koba Tin falling from 75% to 30%. The proposed deal with Optima Synergy Resources Limited was originally announced in March and allowed for OSRL to acquire up to half of MSC’s 75% share for a combination of cash and/or an injection of relevant assets. The new version can give OSRL up to 60% of MSC’s share (i.e. 45% of Koba) in return for a majority stake in two tin projects in Bangka with an estimated 1,500 tonnes tin resource. The projects are expected to start production of some 50 tpm of tin-in-concentrate later this year.
One of the critical features of the deal, which is expected to be completed in the current quarter, is that Koba is granted a 10 year extension by the Indonesian government of its contract of work covering a 41,680 hectare area , which is due to expire on 31 March 2013. In a statement to Bursa Malaysia, MSC noted that the deal is in line with the Indonesian government’s “aspiration for greater local participation in both the ownership and management of mining companies”.
Koba has been loss-making in the last two quarters, as lower tin prices have coincided with a drop in production and low capacity utilisation. It produced 6,332 tonnes of refined tin last year, well below its capacity of some 25,000 tpy. State-controlled PT Timah holds the balance of 25% of its equity.
