Nickel Mines/Tsingshan Collaboration
In September 2017 Nickel Mines signed a landmark Collaboration and Subscription Agreement (CSA) with Shanghai Decent Investment (Group) Co. Ltd (Shanghai Decent), (a Tsingshan group company) and a passive strategic cornerstone investor Shanghai Wanlu Investment Co. Ltd (Wanlu), introduced by CO2 Capital Pte Ltd, a corporate advisor to Nickel Mines, to build a 2-line RKEF plant for US$200M.
The initial stage of the agreement saw Shanghai Decent and Wanlu invest US$26M and US$24M respectively for Nickel Mines shares in April 2018.
As governed by the CSA, the Company has provided the aggregate of US$50 million received from Shanghai Decent and Wanlu by way of a shareholder loan to Hengjaya Holdings Private Limited (Hengjaya Holdings), a Singaporean incorporated intermediate holding company established to wholly own an Indonesian incorporated RKEF special purpose vehicle, PT Hengjaya Nickel Industry (Hengjaya Nickel), that will in turn construct, own and operate the RKEF Project.
Upon completing an IPO Nickel Mines had the option to increase its holding in Hengjaya Holdings up to 60%. This option was exercised in September 2018, with Nickel Mines moving to a 60% ownership in Hengjaya Holdings through the payment of US$70M to Shanghai Decent.
No later than 12 months after first NPI production from the RKEF Plant Nickel Mines could elect to acquire the remaining equity interest in Hengjaya Holdings it does not already own for (US$120M). This was subsequently amended in September 2019, see below.
Shanghai Decent agreed to indemnify Hengjaya Holdings or Hengjaya Nickel if the actual construction cost of the RKEF Project exceeds US$200 million. The cost of the RKEF Project was funded as follows:
· US$50 million shall be funded from the initial subscriptions from Shanghai Decent and Wanlu, as described above; and
· The balance of construction costs was funded by Shanghai Decent by way of shareholder loans injected into Hengjaya Holdings.
In September 2019 Nickel Mines announced the Company and Shanghai Decent announced they had agreed to amend two material terms in the CSA, with Nickel Mines agreeing to limit its contractual option to further equity interest in HNI to not more than 80% (previously 100%) and the option period during which Nickel Mines can acquire further equity interest in HNI has been extended until 30 November 2020 (previously 31 January 2020).
Further Collaboration - Collaboration Agreement Executed for two additional RKEF lines
In November 2018 the Company announced the execution of a binding Collaboration Agreement (‘CA’) with its partner Shanghai Decent to acquire up to an 80% equity interest in 2 additional RKEF lines currently under construction within the IMIP.
The additional RKEF lines (hereafter referred to as ‘Ranger Nickel’) will be owned under a replica structure to RKEF lines 1 and 2 (hereafter referred to as ‘Hengjaya Nickel’) with Nickel Mines acquiring its interest through a Singaporean incorporated holding company, Ranger Investment Private Limited (‘Ranger’) that will wholly own an Indonesian incorporated PMA operating company, PT Ranger Nickel Industry (‘RNI’) that will wholly own the Ranger Nickel RKEF lines.
The CA provides for Nickel Mines to acquire its interest in the three tranches:
(1) An initial acquisition, the ‘First Acquisition’, saw in November 2018 Nickel Mines acquire an initial interest of 17% in Ranger and 17% of all shareholder loans due to Shanghai Decent (and its affiliates) at cost of US$50M (based on a valuation of US$300M).
(2) A ‘Second Acquisition Option’, permitted Nickel Mines to increase its interest in Ranger and in the total shareholder loans to between 51% and 60% before 31 December 2019. If the Second Acquisition was completed within 60 days after the first batch of nickel pig iron (‘NPI’) being produced from the Ranger Nickel RKEF lines, the additional percentage acquired will be calculated based on a discounted valuation of US$280M. If the Second Acquisition is completed more than 60 days after the first batch of NPI is produced from the Ranger Nickel RKEF lines, the additional percentage acquired will be calculated based on a valuation of US$300M. In April 2019 Nickel Mines announced its intention to move to a 60% interest and in August 2019 the acquisition was completed, with the amount paid based on the discounted valuation of US$280M.
(3) Conditional upon completion of the Second Acquisition Option, a ‘Third Acquisition Option’, will permit Nickel Mines to increase its interest in Ranger and in the total shareholder loans to up to 80% within 18 months of the first batch of NPI being produced from the Ranger Nickel RKEF lines. Any additional interest acquired under the Third Acquisition Option will be calculated based on a valuation of US$300M.
For additional information see the ASX announcement Collaboration Agreement Executed for 2 Additional RKEF Lines.