Angel Nickel Project –
80% interest Nickel Industries
In October 2020 Nickel Industries the signing of an MoU with Shanghai Decent to acquire a 70% interest in the Angel Nickel Project (‘Angel Nickel’), a development project within the IWIP on Halmahera Island in Indonesia’s North Maluku province. This was followed on 24 November 2020 with the execution of a binding Definitive Agreement (Ágreement’) to acquire 70% in Angel Nickel, which was subequently increased to 80%.
The Angel Nickel project will be a joint collaboration with Shanghai Decent, the Company’s largest shareholder, comprising:
- four 54 KVA rotary kiln electric furnace (‘RKEF’) lines with an annual nameplate production capacity of 36,000 tonnes of nickel metal (in nickel pig iron); and
- a 380MW power plant.
Angel Nickel has been structured under a similar corporate structure to the Company’s existing RKEF assets, with Shanghai Decent again taking the lead role in the design, construction and operation of the Angel Nickel project. Shanghai Decent has contractually commited that the total cost of Angel Nickel shall not exceed US$700M. i.e. the Company’s 80% interest will not exceed US$560M.
On 27 January 2022 Nickel Industries announced the Angel Nickel project had entered its commissioning phase, with the first of its four RKEF lines having commenced NPI production, well ahead of the October 2022 contractual delivery date for the commencement of commissioning. The maiden ‘NPI tap’ occurred on 25 January and will see a further accelerated timetable where the Project’s other three RKEF lines will be progressively commissioned over the following 60 to 90 days, resulting in all four RKEF lines anticipated to have commenced operations by the end of April 2022.
The Agreement provided for Nickel Industries to acquire its 70% interest in Angel Nickel in two tranches:
- An initial acquisition, the ‘First Acquisition’, whereby Nickel Industries will acquire an initial interest of 30% in Angel Nickel and 30% of all shareholder loans due to Shanghai Decent (and its affiliates) at cost of US$210M (based on a valuation of US$700M) with this initial acquisition to be finalised by no later than 31 March 2021.
- Under the ‘Second Acquisition’ Nickel Industries will acquire an additional 40% in Angel Nickel and 40% of all shareholder loans due to Shanghai Decent (and its affiliates) at cost of US$280M (based on a valuation of US$700M) with this second acquisition to be finalised by no later than 31 December 2021.
At an Extraordinary General Meeting held on 19 January 2021 shareholders voted overwhelmingly in favour of the Company’s acquisition of the initially proposed 70% equity interest in Angel Nickel. An Independent Expert Valuation Report, which formed part of the Notice of Meeting, was released to ASX on 2 December 2020.
The Independent Expert Valuation Report opined:
- The Transaction is fair and reasonable to the Company’s shareholders.
- The advantages of the Transaction significantly outweigh the disadvantages.
- Based on the assumptions in the Independent Expert Valuation Report, the value of 100% of the Angel Nickel Project ranges from US$1.4 billion to US$1.5 billion with the corresponding value of Nickel Industries’ 70% interest ranging from US$1.0 billion to US$1.1 billion.
In January 2021 it agreed by both parties that the Company’s equity participation in the project would increase to 80%.
The amended terms of the Definitive Agreement set out that the Company would acquire an 80% interest in Angel Nickel for US$560M in accordance with the following staged payments:
- Stage 1 – US$210M by the end of Q1 2021 to secure an initial 30% interest.
- Stage 2 Part A – US$137.6M by 30 June 2021 to secure a further 20% interest.
- Stage 2 Part B – US$210M by 31 December 2021 to secure a further 30% interest.
On signing the MoU, the Company paid a US$10M ‘good faith deposit’ to Shanghai Decent and upon execution of the Definitive Agreement made a further US$20M ‘down payment’ to Shanghai Decent with the combined US$30M to be offset against the Stage 1 payment. The Stage 1 balance payment of US$180M was made in late January 2021.
The Stage 2 Part A payment of US$137.6M was made in April 2021. This was inclusive of a $2.4M discount based on early exercise, as announced on 20 January 2021.
At the Company’s Annual General Meeting held on 18 May 2021 shareholder approval was received for Nickel Industries to acquire the additional 10% equity interest in Angel Nickel.
On 30 September 2021 the Company paid US$210M for an additional 30% interest in Angel Nickel, completing its acquisition of an 80% interest in Angel Nickel.