The mineral ore processing or downstream strategy that mining giant Merdeka Copper Gold (MDKA) is currently undertaking is set to give a boost to its financial performance, according to Mirae Asset Sekuritas analyst Nafan Aji Gusta.
“Several corporate actions by MDKA that are related to downstream mineral processing are set to give a positive impact to the company’s performance,” Nafan recently told Investor Daily.
Nafan said that the diversification of processed mineral products could boost the topline and bottom-line performance.
MDKA is undertaking corporate actions via its subsidiary Merdeka Battery Materials (MBMA) which is expected to be one of the key players in Indonesia’s electric vehicle battery industry. MBMA hosts one of the world’s largest reserves of nickel, which is a mainstay ingredient for EV batteries. MBMA data shows that its subsidiary Sulawesi Cahaya Mineral’s mines hold 13.8 million tons of nickel (1.22 percent Ni content) and 1.0 million tonnes of cobalt (0.08 percent Co content). This abundance of minerals becomes the supply of raw materials for MBMA’s nickel processing plants, be it the Rotary Kiln-Electric Furnace (RCEF) that processes saprolite or the high-pressure acid leach (HPAL) that processes limonite ores.
MBMA last month also inked an agreement with China-based GEM Co. Ltd. to set up the ESG New Energy Material, a joint venture for the HPAL plant with MBMA holding 55 percent of the shares, while the remaining 45 percent goes to GEM.
GEM will construct the HPAL plant, which lies at the Indonesian Morowali Industrial Park (IMIP), in two phases and adopt a turn-key system. In the first phase, the HPAL processing plant will have a capacity of 20,000 tons of nickel in mixed hydroxide precipitate per year. Its commissioning will begin by the end of 2024. The capacity will rise to 30,000 tons per year in the second phase which is set to take place in mid-2025.
Most of the Indonesian nickels currently go to stainless steel production. As the world tries to shift away from fossil fuel-based vehicles, the demand for nickel increases amid the growing development of the EV ecosystem. It is expected that EV batteries will account for 30 percent of the global nickel use by 2040. As EV demand grows, this will likely make MBMA one of the world’s top battery raw material suppliers.
MBMA president director Devin Antonio Ridwan said that the corporate actions show MBMA’s commitment to becoming a sustainable and integrated battery manufacturer. MBMA also seeks to be a global supplier in the battery industry ecosystem.
“Our commitment to sustainability, innovation, and global partnership allows us to provide battery raw materials that are high-quality and reliable to support the global transition towards clean energy,” Devin said while reaffirming the company’s commitment towards Indonesia’s mineral downstream policy.
“We are trying to fill and complete the nickel-based industrial tree, by diversifying processing plants, one of which is converting nickel pig iron into low-grade nickel matte products. Apart from that, we will also develop an HPAL factory which will utilize nickel limonite or low-grade nickel as raw material,” Devin said.
Indonesia is currently sparing no effort to build its processing industry. According to President Joko “Jokowi” Widodo, the nickel ore export ban has become a huge economic boon to the state revenue, and this will likely open up new jobs. But it does not stop there. Indonesia also seeks to become a leading battery producer.
According to the US Geological Survey, Indonesia is home to the world’s largest nickel reserves, standing at 21 million metric tons. The Energy Ministry reported that Indonesia’s nickel reserves could last for 73 years for limonite ores or nickel with low nickel content that is below 1.5 percent. The 2021 US Geological Survey report also puts Indonesia as the world’s largest nickel producer.
Thus, it makes sense that Indonesia aims to become a leading player in the EV supply chain and a global battery production hub. Merdeka Group’s presence in the industry shows that an Indonesian company can compete at the global level and become one of the leading players.
“This industrial downstream strategy will strengthen the mineral commodities in the country, in line with what President Joko “Jokowi” Widodo envisions, in which the processing of raw materials is a must in resource-rich developing countries so they don’t rely on imports of half-finished goods,” Nafan said.
Source: Jakarta Globe