23 April 2012
Bold move pays off for MSC
BACK in 2010, Malaysia Smelting Corp Bhd (MSC) took a bold decision to switch from its diversified business model to focus on core businesses it has known for the past 100 years, tin smelting and mining.
Its efforts paid off when MSC Group became the world's second largest tin company with refined tin production at 46,599 tonnes last year, right after China-based Yunnan Tin at 56,174 tonnes.
Now, the rebranding effort to position MSC as a premier international integrated tin smelter and mining group continues under the stewardship of group CEO and executive director Datuk Seri Dr Mohd Ajib Anuar.
He tells StarBizWeek in an interview that MSC will actively look at strengthening its integrated tin smelting and mining investments particularly in Malaysia, Indonesia and the latest venture in Congo, Africa.
Mohd Ajib:. ‘Efforts are still being made to pursue opportunities that w ill increase our tin reserves.’
“After MSC divested most of its non-tin investments and assets abroad, the group has become more prudent with its new investments and prefer to preserve our cash, especially with the current uncertainty in the global economy and volatility in world commodity prices.
“Having said that, efforts are still being made to pursue opportunities that will increase our tin reserves.
“This will be by identifying and undertaking exploration of new tin resources as well as strategic acquisitions of quality mining assets abroad,” explains Ajib, who has 40 years experience in the international tin mining sector.
At the same time, he says MSC will be mindful of high risk greenfield exploration but remains steadfast in advanced exploration and development of assets that will result in quality income-generating operations for the group's sustainability.
In Congo, MSC is currently preparing to invest on a “step-by-step” approach into medium to large deposits tin-mining assets as well as help to develop the existing small scale “artisanal” tin mines for miners in the republic.
“MSC is excited over its upstream venture in Congo especially in the medium and industrial-based mining prospects,” says Ajib.
However, the MSC venture in the republic will be hugely dependent upon the formation of the Congolian cabinet which will give investors more confidence after the incumbent government returns to power in the African nation.
For more than a decade, MSC had been sourcing tin concentrates from Central African countries, which currently provide about 20% to 30% of the total volume of concentrates for its Butterworth smelting plant in Penang.
“But now, we are ready to invest in tin mining in Congo either via securing concession area from the Government or acquisitions of tin mining assets.”
Ideally, for economies of scale, MSC will like to have a sizeable exploration and mining areas of about 10,000ha and above in the republic. For its Congo tin mining assets, he says MSC will likely finance the venture via internally generated funds.
However, he declines to reveal the estimated investment cost for its proposed Congo business.
As for Indonesia, Ajib says the group's unit PT Koba Tin has a contract of work (CoW) with the government, giving it exclusive rights for exploration, mining and smelting tin over a 41,680ha in Bangka Belitung Island.
The CoW commenced in 1973 and was for 30 years and it was renewed for another 10 years up to March 2013.
“We are submitting an application and proposal for a further extension of 10 years to year 2023,” says Ajib, adding that within 10 years of MSC's acquisition, PT Koba Tin has mined and produced tin metal totalling about 145,000 tonnes.
Currently, an ongoing exploration and drilling programme is being undertaken to replenish depleting tin resources. The estimated remaining resources is estimated at 34,000 tonnes contained tin.
Ajib says going forward, it is crucial for PT Koba Tin to initiate steps to increase its production volume to a level where it could reduce its average cost of production volume to a level where it could reduce its average cost of production to about US$20,000 per tonne.
“Several strategic options are being considered including reviving small scale production with the approval of relevant Indonesia authorities,” adds Ajib.
Last month, MSC undertook a strategic alliance with an Indonesian party that would enable the latter to subscribe up to a 23% stake in MSC's 100% owned Bemban Corp Ltd which in turn hold 75% interest in PT Koba Tin.
Upon renewal of PT Koba Tin's CoW, the Indonesia partner will be able to increase further its stake to 50% with an effective interest of 37.5% in PT Koba Tin, subject to certain conditions precedent.
The transaction, once completed, will see MSC's effective interest in PT Koba Tin reduced to 37.5% through a 50% stake in Bemban Corp.
“We expect the whole transaction will be completed by March next year,” he adds.
Apart from PT Koba Tin, MSC also has three 100% subsidiaries in Indonesia, PT SRM,T MSC and PT Bangka Resources and 18.54% in PT Tenaga Anugerah which undertakes exploration and development of tin resources through strategic cooperation agreements with local partners.
Source - www.thestar.com.my