Gulf Manganese Corporation Limited is an Australian registered company (ACN 059 954 317) listed on the Australian Securities Exchange (ASX: GMC) with its head office in Perth, Western Australia.
Value adding ores is strongly encouraged by the Indonesian Government to enrich the country's mineral endowment thereby enhancing the economy and creating employment.
All initiatives to value adding have full support from all levels of government and IMG will benefit from the Government's Financial Incentives Programme which effectively will result in a 5 year tax holiday.
*Alloy Consult (www.alloyconsult.com) advise the average product-weight cash costs for HCFeMn last 5 years is US$1,042/tonne.
The financial analysis of the Study shows that the project has the potential to return a positive EBITDA of US$ 374.7 million over a 10 year period supporting an estimated Net Present Value of US$ 160.6 million, using an 8% discount factor. The project requires a modest start-up capital investment of US$66 million which is staged over 5 years, plus working capital and provides estimated returns supporting an internal rate of return of 55.6%.
The Study is based on a manganese purchasing, processing and smelting business. High grade manganese ore will be purchased locally from within Indonesia.
The business model can be scaled up or down as ore supply allows which minimises start-up capital requirements. The business model can also be augmented in terms of revenue streams and ore sources permitting early cash flow and future expansion opportunities.
The development of the business plan to full capacity is staged, which minimises capital expenditure whilst developing the first smelting unit.
Project Funding The total project capital cost of US$65.6M is spread over 5 years and will be provided by:
Manganese ores for the processing and smelting business will be purchased from a number of local suppliers.
To optimise the smelting process high grade ore will be purchased locally from artisanal miners and other sources in Indonesia. The manganese ores in Indonesia are typically high grade, approximately +50%Mn and make ideal smelter feed. The local Indonesian manganese ores are typically low in iron content, <2% Fe, and as such iron units need to be added.
Iron units are an important component in the smelting process to ensure the product specifications are met with respect to manganese grade. Iron units will be added by the purchase of iron ore from Sumatra.
Processing of Manganese Ores
Prior to smelting, manganese ores will be processed via industry standard, crushing, screening and mechanical jigging processes. Processing, prior to smelting, is required to remove contaminant and other waste materials as well as ensuring the manganese ores are correctly sized.
The manganese ores in Indonesia have a high specific gravity and as such they are ideal for separation using a jigging process.
The proposed crushing, screening and jigging components are typically used for processing manganese ores and are relatively low technology, low operating cost and suitable for the ore types seen in Indonesia.
The systems are also scalable in that a number of smaller processing sites may be located close to mining operations minimising operating costs.
Processing and Sale of Manganese Ores
Gulf will enter into an agreement to secure 50 hectares of land with the landowners and the local Regent for the development of the proposed smelter. This site will be close to the ocean which will minimise consumable import costs and export logistics costs, as well as permitting use of sea water for power station cooling systems.
Power for the first 6MVA smelter will be supplied on a user pays basis and sourced from the local Government power supply company PT PLN.
Gulf is in discussions with power supply infrastructure providers about long term power supply options using a BOOT (Build, Own, Operate and Transfer) arrangement, where a contractor builds and supplies power on a user pays basis and ultimately Gulf will purchase the infrastructure and operate the power station in the longer term.
The corporate tax rate in Indonesia is 25%.
Application will be made to have Gulf's Indonesian subsidiary, PT Gulf Mangan Grup, classified as a "Pioneer Industry" as the project will have a combined investment of US$ 141.0 million (US$ 66 million for the smelter and US$ 75 million for the Power Plant).
As a Pioneer Industry the company will have access to 10 years of full tax relief followed by another 2 years of 50% tax relief.