Nickel / Tsingshan
Original Collaboration – Hengjaya Nickel
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 Shanghai Wanlu Investment Co. Ltd (‘Wanlu’), a passive strategic cornerstone investor, 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 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 constructed, owns and operates the RKEF Project.
- Upon completing an IPO in August 2018 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 did 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 was 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 had agreed to amend two material terms in the CSA, with Nickel Mines agreeing to limit its contractual option to further equity interest in Hengjaya Nickel to not more than 80% (previously 100%) and the option period during which Nickel Mines could acquire further equity interests in Hengjaya Nickel had been extended until 30 November 2020 (previously 31 January 2020). On 30 June 2020 Nickel Mines exercised its option to acquire a further 20% of the shareholder loans and issued and paid-up share capital of Hengjaya Nickel through the payment of US$60M. This took Nickel Mines interest in Hengjaya Nickel to 80%.
Further Collaboration – Ranger Nickel
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 under construction within the IMIP at the time.
The additional RKEF lines (hereafter referred to as ‘Ranger Nickel’) are owned under a replica structure to Hengjaya Nickel, with Nickel Mines acquiring its interest through a Singaporean incorporated holding company, Ranger Investment Private Limited (‘Ranger’) that wholly owns an Indonesian PMA (‘foreign direct investment company’) operating company, PT Ranger Nickel Industry (‘RNI’) that wholly owns the Ranger Nickel RKEF lines.
The CA provided for Nickel Mines to acquire its interest in the three tranches:
- An initial acquisition in November 2018, the ‘First Acquisition’, saw Nickel Mines acquire an 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).
- ‘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. 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 due to early exercise of US$280M.
- A ‘Third Acquisition Option’, permitted 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. On 30 June 2020 Nickel Mines exercised its option to acquire a further 20% of the shareholder loans and issued and paid-up share capital of Ranger through the payment of US$60M. This took Nickel Mines interest in Ranger Nickel to 80%.
Further Collaboration – Angel Nickel
The original Angel Nickel Agreement provided for Nickel Mines to acquire its 70% interest in Angel Nickel in two tranches:
- An initial acquisition, the ‘First Acquisition’, whereby Nickel Mines would 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 Mines would 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 Mines’ 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%.
Under the amended terms of the Definitive Agreement the Company will 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 – US$350M by the end of Q4 2021 to secure a further 50% 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 January 2021.
While consideration for the second stage acquisition of 50% (including the additional 10% detailed above) remains payable by 31 December 2021, if the Company elects to make the second stage payment by 30 June 2021 the acquisition consideration will be reduced to US$344M, a discount of US$6M for early payment.
At the Company’s Annual General Meeting held on 18 May 2021 shareholder approval was received for Nickel Mines to acquire the additional 10% equity interest in Angel Nickel.