Tuesday 25 October 2011

Cahya Mata plant cost up on additional investment

PETALING JAYA: Cahya Mata Sarawak Bhd (CMSB) yesterday said the US$50 million (RM156.5 million) increase in its estimated cost to build the manganese and ferro silicon smelting plant in Samalaju, Sarawak, is due to additional investments in certain aspects and criteria of the plant.

When the group signed the memorandum of understanding with OM Materials (S) Pte Ltd in July, the cost of building the smelting plant was estimated at US$450 million.

However, last Thursday, the group said the cost had increased to US$500 million.

CMSB clarified to Bursa Malaysia that the additional investments include investment in conveyor belt for US$35 million, additional engineering, procurement, construction management and indirect costs for US$9.2 million, last-mile electricity connection for US$3.8 million and insurance for US$2 million.

According to the breakdown information, the conveyor belt system, insurance and last-mile electricity connection are additional costs not included in the initial estimation.

The management did not provide the reason for the additional conveyor belt system.

On the supply of raw materials for the smelting plant, CMSB said it is currently negotiating with other parties, believed to be OM Holdings Ltd, the parent company of OM Materials, on terms of the raw material supply agreement including the duration.

CMSB said that barring any unforeseen circumstances, it expects the agreement to be concluded by the first quarter of next year.

The group added that negotiations with off-takers of its end products will be concluded by the second quarter.

The project is undertaken through a joint-venture company called OM Sarawak Sdn Bhd, which is 20%-owned by Samalaju Industries Sdn Bhd, a wholly-owned subsidiary of CMSB, together with OM Materials (S) Pte Ltd, a wholly-owned subsidiary of OM Holdings.


This article appeared in The Edge Financial Daily, October 25, 2011.
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