Ranger Nickel Project – 80% interest Nickel Industries
In November 2018 Nickel Industries announced it had elevated an MoU to an executed binding Collaboration Agreement (‘CA’) with its partner Shanghai Decent to acquire up to an 80% equity interest in 2 additional RKEF lines under construction at the time within the IMIP.
The additional RKEF lines, the Ranger Nickel Project, are owned under a replica structure to the Company’s Hengjaya Nickel Project, with Nickel Industries acquiring its interest through a Singaporean incorporated holding company, Ranger Investment Private Limited (‘Ranger’) that owns a Indonesian incorporated PMA operating company, PT Ranger Nickel Industry (‘Ranger Nickel’) wholly owns the Ranger Nickel Project.
The terms of the CA provided for Shanghai Decent to take a lead role in the design, construction and operation of the Ranger Nickel Project, with an annual production capacity of no less than 14,000 tonnes of equivalent contained nickel, funded by Shanghai Decent (or its affiliates) by way of shareholder loans to Ranger and for construction to be completed within 20 months from the date of the CA.
The CA provided for Nickel Industries to acquire its interest in the three tranches:
- An initial acquisition, the ‘First Acquisition’, saw Nickel Industries acquire an initial interest of 17% in Ranger and 17% of all shareholder loans due to Shanghai Decent (and its affiliates) at a cost of US$50 million (based on a valuation of US$300 million).
- A ‘Second Acquisition Option’, permitted Nickel Industries to increase its interest in Ranger and in the total shareholder loans to between 51% and 60% before 31 December 2019. In April 2019 Nickel Industries announced its decision to increase its 17% ownership interest in the Ranger Nickel Project to 60%. The Company’s move to 60% of Ranger Nickel was funded via a US$150M financing package comprising US$80M of senior secured debt and US$70M of equity. The financing package surplus above the Ranger Nickel acquisition consideration will be used to facilitate a number of strategic initiatives being undertaken at the Hengjaya Mine and for general working capital purposes. The US$70M equity component of the finance package was funded in part by Shanghai Decent increasing its direct investment in Nickel Industries by accepting US$40M of the Ranger Nickel acquisition consideration as Nickel Industries’ shares and the balance by from the placement to professional and sophisticated investors completed in July 2019. In August 2019 Nickel Industries completed its acquisition of the additional 43% in Ranger Nickel to take its interest to 60%.
- Conditional upon completion of the Second Acquisition Option, a ‘Third Acquisition Option’, permitted Nickel Industries 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 Project. Any additional interest acquired under the Third Acquisition Option was calculated based on a valuation of US$300 million. Following the completion of the Accelerate Non-Renounceable Rights Issue in May 2020 the Company advised Shanghai Decent of its intention to exercise its call option to acquire an additional 20% in the Ranger Nickel Project and this acquistion was completed on 30 June 2020, taking Nickel Industries interest to 80%.
Production numbers for Ranger Nickel in 2021 were as follows:
On 30 May 2019, Shanghai Decent, the Company’s operating partner and equity holder in the Ranger Nickel Project advised that first NPI had been produced from the first of Ranger Nickel’s two rotary kilns. On 29 June 2019 news followed that Ranger Nickel’s second kiln had also produced its first NPI in a maiden production run.
The commissioning of Ranger Nickel’s kilns came well ahead of previous guidance for the middle of the September 2019 quarter and saw all four kilns across the Company’s Hengjaya Nickel and Ranger Nickel RKEF projects into production in less than 18 months.
In 2020 Ranger Nickel produced 149,969 tonnes of NPI, containing 22,107 tonnes of nickel metal equivalent, at an average cash cost of US$7,327/t of nickel. In 2021 Ranger Nickel produced 149,308 tonnes of NPI, containing 20,390 tonnes of nickel metal equivalent, at an average cash cost of US$10,090/t of nickel.
Corporate Income Tax Relief for Ranger Nickel
During the March 2019 quarter, the Minister of Finance of the Republic of Indonesia granted the Company’s Indonesian operating entity, PT Ranger Nickel Industry (‘Ranger Nickel’), material corporate income tax relief for its Ranger Nickel Project.
The tax concessions mirror those previously granted to the Company’s owned Hengjaya Nickel Project.
Notice of the tax relief was communicated to the Company by official decree from the Minister of Finance of the Republic of Indonesia on the basis that Ranger Nickel had “met the criteria and requirements for the reduction of corporate income tax as regulated in Article 3 of the Regulation of the Minister of Finance Number 35/PMK.101/2018 concerning Provision of Corporate Income Tax Reduction Facilities”.
The corporate income tax reduction is as follows:
- Corporate Income Tax Reduction of 100% for a period of seven tax years, starting from the tax year in which commercial production is achieved;
- Corporate Income Tax Reduction of 50% of payable income tax for a period of two tax years, starting from the end of the initial seven year period; and
- Exemption from withholding and tax collection by third parties on sales proceeds that would normally be remitted to the Indonesian Revenue Department for a period of seven years, also commencing from the tax year in which commercial production is achieved.
It should be noted that these concessions may be revoked and are maximum periods that may be amended or adjusted if certain conditions are not met, the most important condition being the satisfaction of a minimum investment realisation which Ranger Nickel’s project comfortably exceeds.