KUCHING: Borneo Oil Bhd plans to increase its investment to RM50.7mil in Sabah’s first integrated clinker and cement plant (ILPP), which is expected to commence operations by third quarter (3Q) of 2022.
The ILPP in Lahad Datu, which is owned by Makin Teguh Sdn Bhd (MTSB), has the capacity to produce 720 tonnes of portland grade cement per day.
The ILPP is the first micro cement plant in Malaysia utilising green technology, comprising heat recovery and multi-fuel system able to utilise a mixture of heavy fuel oil, and biomass mixed fuel.
This system is able to use palm kernel shells and other biomass and waste to generate heat.
The overall system utilises rainwater and recycled water to reduce the overall plant carbon footprint, according to Borneo Oil.
Borneo Oil is Sabah’s largest private owner of limestone reserves of cement grade quality, and has heavily invested in this resource.
Its planned increased investment in the ILPP will be via the total acquisition of some 19.6 million shares in MT 23 Resources Ltd, representing 19.5% of the existing equity interest in MTSB for RM50.7mil, Borneo Oil said in a filing with Bursa Malaysia last Thursday.
MT 23 Resources owns a 29.93% stake in MTSB.
MT 23 Resources has earlier sold and transferred to Borneo Oil about 15 million shares of the issued and paid-up capital of MTSB for RM19.3mil by a conditional agreement dated Sept 8, 2021 and agreed to sell a further 4.51 million shares (additional shares) upon obtaining an independent assessment of the company to ascertain the valuation of MTSB.
Borneo Oil has agreed to purchase the additional shares in MTSB from MT 23 Resources for RM31.4mil to raise its equity interest in MTSB to 19.5%.
MTSB is valued at RM263mil by an independent professional valuer last month, and its net tangible assets as at financial year ended June 30, 2021 is RM195.3mil.
Borneo Oil, which owns home-grown fast food restaurant chain SugarBun, and is also involved in gold mining activities in Pahang, said the RM31.4mil purchase consideration would be paid from internally generated funds. The deal is expected to be completed by 3Q22.
The ILPP is situated adjacent to Borneo Oil group’s limestone quarry land. MTSB has entered into a long-term supply contract for limestone with Borneo Oil group on the current stockpile and overburden waste from existing quarrying operations to supplement the ILPP’s initial limestone feedstock requirements.
“This supply of current stockpile and recovery waste from down streaming activity is also in line with Borneo Oil group’s initiative towards zero waste and reusing/upcycling all materials.
“This syngeristic alliance will enable MTSB and Borneo Oil to pool their combined limestone resources and position Borneo Oil group for future expansion.
“The acquisition presents an opportunity for Borneo Oil group to move downstream its quarrying resources to boost the profits further. There is synergy between the Borneo Oil group’s existing limestone quarrying business operations and MTSB’s clinker and cement plant,” it added.
According to Borneo Oil, the outlook for Sabah’s clinker and cement industry is favourable given the high cement price in the state compared with the rest of Malaysia, and given ILPP’s proximity to the Brunei-Indonesia-Malaysia-Philippines East Asean Growth Area (BIMP-EAGA).
“The already high price of cement in Sabah has been made worse in recent months due to the drastic increase in logistics costs and fluctuation in foreign exchange rates.
“The Covid-19 closures of 2020 and 2021 have created an unprecedented urgency for Sabah to become more self-reliant in various sectors of economic importance,including food and construction materials.
“Cement is one such commodity that is essential to development. Sabah can no longer afford to rely on 100% imported clinker and cement. Therefore, the emergence of ILPP in Sabah is timely.
“Sabah has an annual demand of between 1.2 million and 1.4 million tonnes of cement per year. This does not include the future development projects planned on the east coast of Sabah, and the demand in the BIMP-EAGA region with close proximity to the east coast of Sabah,” it added.