Catalist-listed Silkroad Nickel has entered into a new offtake agreement with PT Ekasa Yad Resources, a Tsingshan Group company on March 15 for an estimated contract value of US$90 million ($120.9 million).

The value is based on the benchmark price for nickel ore set by the Indonesian government.

The agreement provides for the group’s supply of a total of 2.7 million metric tonnes of high grade nickel ore from March to December 2022, with a minimum quantity of 50,000 metric tonnes per month.

“We are pleased to announce the entry of the agreement with Tsingshan Group. The group is preparing to deliver its first shipment under the agreement within the next two weeks and expects to gradually increase its production from April 2021 onwards to fulfill the new offtake commitments under the agreement,” says Hong Kah Ing, executive director and CEO of Silkroad Nickel.

“The nickel ore is expected to be used to meet the increasing demand from the emerging electric vehicle battery industry. The group is in the process of investing in its downstream nickel pig iron processing facility in 2021 and intends to use part of the cash flows generated from this Agreement to build its proposed RKEF (Rotary Kiln Electric Furnace) smelter project,” he adds.

Get the latest Singapore corporate news stories for FREE

The agreement is expected to have a positive impact on the net tangible assets (NTA) per share and earnings per share (EPS) of the group for the current financial year ending Dec 31.

Shares in Silkroad Nickel closed 0.5 cent lower or 1.3% down at 39.5 cents on March 15.