Indonesian nickel mining group Silkroad Nickel’s subsidiary PT Teknik Alum Service has signed an offtake agreement to supply nickel ore to PT Transon Bumindo Resources (PT TBR).

The contract is valued at more than S$400m ($291.71m). Under the terms of the agreement, the Silkroad Nickel group will supply 15 million tonnes of nickel ore over a term of five to eight years, beginning in March 2020, to PT TBR.

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The agreement requires the group to deliver a minimum of 1.5 million tonnes of nickel ore per annum.

Silkroad Nickel executive director and CEO Hong Kah Ing said: “This agreement with PT TBR, which is building a new rotary kiln electric furnace smelter facility around 2km from the group’s mine site in Sulawesi, Indonesia, gives us the impetus to not only ramp up our production and start the exploration of new areas within our concession, but to also consider the acquisition of new concession areas.”

PT TBR is part of the Qingdao Hengshun Zhongsheng Group that is majority owned by the Qingdao state government. It has investments in Indonesian industrial parks, mining, and energy with a focus on electricity.

“This agreement with PT TBR gives us the impetus to ramp up our production and start the exploration of new areas.”

Silkroad Nickel is currently engaged in talks to appoint an undisclosed China state-owned company as the main mining contractor to ramp up its nickel ore production.

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The group has a Production Operations IUP permit to undertake nickel ore mining operations in Morowali, Sulawesi, Indonesia. The mining concession covers an area of 1,301ha.

In May this year, an independent report estimated nickel resources covering certain sections of the mining concession area with a total coverage area of 494ha to be at 66.5 million wet metric tonnes.