Contractors Responsible for Repairs; 2006 Nickel Production Target will be Lowered
Jakarta, July 5, 2006 - PT ANTAM Tbk (ASX - ATM; JSX, SSX - ANTM) announced today it has been informed by the turnkey, or Engineering, Procurement and Construction (EPC), contractors that built ANTAM's new FeNi III smelter that a leak from the metal tap hole of the smelter will require a shutdown for repairs lasting around three months. The metal tap hole is located at the bottom of the furnace, where molten crude ferronickel is extracted from the furnace during a 'metal tap'. Because of the shutdown, ANTAM's 2006 production target for nickel contained in ferronickel will be lowered to around 13,000 - 16,000 tonnes from the target of 19,000 tonnes, although it is too early in the investigation to determine exactly what amount.
The leak occurred midday on Saturday July 1, 2006. A preliminary investigation has shown that liquid metal appeared in the bottom side of the metal tap hole a few minutes after plugging mud into the metal tap hole using the mud gun. Attempts to manually plug the metal tap hole were not successful. As a result, over the next 10 hours, 230 tonnes of molten crude ferronickel poured out of the furnace, equivalent to 40.25 tonnes of nickel contained in ferronickel. The automatic mud gun, metal tap hole and adjacent electronic cables were all damaged. No one was injured.
Previously announced delays to declaring commercial operations occurred because all conditions for conducting a final plant test had not been satisfied. On that Saturday morning the final condition was satisfied and the plant test was about to begin, which if successful, would bring about commercial operations and the handover of the plant to ANTAM.
FeNi III is being built by the unincorporated consortium of Mitsui & Co. Ltd. and Kawasaki Heavy Industries Ltd, of Japan. Final testing of the smelter and hand-over of the smelter by the contractors has yet to occur. As the EPC contractors, Mitsui and Kawaski are responsible for all work and testing prior to commercial operations of the plant. A full investigation is underway and a full formal report will be submitted by the EPC contractors. After reviewing the report, ANTAM will release a more detailed public announcement.
Since switching on FeNi III on February 12, 2006, and during the commissioning period, ANTAM, under the supervision of the EPC contractors, have conducted 390 metal taps from FeNi III, at a rate of about six per day, producing a total of 1,792 tonnes of nickel contained in ferronickel.
ANTAM's President Director D. Aditya Sumanagara said, 'We are extremely disappointed by this development as we had been operating FeNi III at capacity for one and a half months and were expecting to begin the final test and declare commercial operations at the beginning of July. We will do whatever we can to minimize lost revenues due to lower than expected ferronickel production volume'.
To the end of June 2006, ANTAM had produced 6,860 tonnes of nickel contained in ferronickel. It is anticipated ANTAM's other ferronickel smelters, FeNi I and II, will produce about 5,000 tonnes in the second half of 2006. Additional output will occur once FeNi III resumes operations. When operating at capacity, FeNi III can produce 1,200 tonnes of nickel contained in ferronickel per month. ANTAM will also attempt to outsource ferronickel production with other companies and to implement further measures to offset lost revenue. ANTAM�s management predicts the production target of ferronickel will decline to around 13,000 - 16,000 tonnes.
The US$320 million FeNi III project includes a new smelter and power plant and will more than double ANTAM's contained nickel in ferronickel capacity from 11,000 tonnes to 25,000 tonnes per year. The project is funded with US$200 million Notes issued in 2003 by ANTAM�s subsidiary ANTAM Finance Ltd., US$30 million from an investment credit facility provided by BCA, a domestic bank, as well as internal cash. Construction began in October 2003 and the switch on of FeNi III occurred on February 12, 2006. On Saturday July 1, 2006, when the leak from the metal tap hole occurred, the commissioning, or �trial� period was nearly over, after which time commercial operations are declared and the EPC contractors hand-over the FeNi III smelter.
