Silkroad Nickel Ltd., an Indonesian nickel mining group, has entered into a memorandum of understanding (MoU) with Shandong Xinhai (Singapore) Pte Ltd. to build and operate a rotary kiln electric furnace (RKEF) in Indonesia. The RKEF Project will produce up to 400,000 metric tons (mt) of ferronickel and will be supported by a coal-fired power plant.

Under the MoU, a feasibility report and any necessary due diligence on the RKEF Project will be completed by the both parties. If the RKEF Project is deemed to be economically feasible, they will agree on the financing requirements and consider a proposal for Silkroad Nickel to invest or acquire at least a 30% shareholding interest investment company to be incorporated in Singapore by Shandong Xinhai. This will be subject to board approvals.

Silkroad Nickel will be a long-term supplier of nickel ore for the operations of the RKEF smelter facility, under a long-term offtake contract. In addition, Silkroad Nickel will be responsible for obtaining all necessary permits and licenses and obtaining and managing the land required for the RKEF smelter facility. Shandong Xinhai will also be responsible for the design, procurement, development, construction and operation of the RKEF smelter facility, including the provision of suitably qualified and experienced personnel.

“We are pleased to have signed this MOU with China’s largest producer of nickel alloy,” said Hong Kah Ing, executive director and CEO of Silkroad Nickel. “Shandong Xinhai is the only enterprise in China capable of co-producing electricity and ferronickel.”

Shandong Xinhai has the ability to produce 10 billion kilowatt-hours (kW-hr) of electric power and 1.9 million mt of ferronickel, accounting for more than half of China’s total market share. The company also has a permit to operate an RKEF smelter facility, which meets the environmental standards required in China. The facility can co-produce ferronickel alloy and generate electricity with a 1.4-gigawatt coal-fired power plant.

Silkroad Nickel has been granted a production operations IUP to conduct nickel ore mining operations in a mining concession area, covering more than 1,300 hectares located in Morowali, Sulawesi, Indonesia, which has estimated nickel resources of 66.5 million wet mt.