CMS's OM Materials Sarawak on expansion mode

CMS group managing director Datuk Isaac Lugun says OM Materials (Sarawak) Sdn Bhd is working on the design and preparation for its phase two project targeted for completion by 2022.

KUCHING: Cahya Mata Sarawak Bhd’s (CMS) associate OM Materials (Sarawak) Sdn Bhd (OMS) is embarking on an expansion project of its ferrosilicon and manganese alloy smelting plant in Samalaju Industrial Park, Bintulu to boost production capacity.

OMS is currently working on the design and preparation for its phase two project targeted for completion by 2022, according to CMS group managing director Datuk Isaac Lugun.

Phase two entails the construction of an additional two to four sets of manganese alloy furnaces.

On top of this, the existing ferrosilicon furnaces will be undergoing conversion to enable them to produce metallic silicon.

The smelting plant, one of the pioneer energy-intensive industries in the Sarawak Corridor of Renewable Energy (Score), has 10 ferrosilicon furnaces and six manganese furnaces.

Under phase one, the plant has a production capacity of between 170,000 tonnes and 210,000 tonnes per annum of ferrosilicon and between 250,000 tonnes and 300,000 tonnes per annum of manganese alloy.

In 2019, OMS recorded ferrosilicon production output of 230,735 tonnes and manganese alloy production of 248,163 tonnes.

CMS has a 25% equity interest in OMS, with its joint-venture partner OM Holdings Ltd holding the other 75% stake.

Lugun said upon commissioning of phase two, OMS is expected to generate RM100mil per year in profit after tax and non-controlling interest (PATNCI) to the CMS group in five years’ time.

In the immediate term, he sees challenging prospects for OMS as its performance will be impacted by the recent weak commodity prices, US-China trade war and the uncertainties brought about by the Covid-19 outbreak which has caused supply chain disruption to the company.

“However, the group remains confident of OMS’ longer-term prospects owing to its strong underlying fundamentals due to its position in the first quartile of the global production cost curve and its strong global presence, ” said Lugun in a strategic review of CMS group performance in its 2019 annual report issued last week.

OMS has invested some A$20mil (RM55.7mil) in a sinter plant, which underwent cold commissioning in the fourth quarter of 2019 (4Q19), with hot commissioning targeted in the first half of 2020.

With a production capacity of 250,000 tonnes per annum, the new plant is set to reduce the production cost of manganese alloy by upgrading manganese ore fines via a sintering process with coke to produce sintered manganese ore lump.

This will bring down the cost of producing manganese alloy while improving furnace productivity.

OMS has also recently completed the expansion works for its raw materials storage warehouses as well as finished product warehouses at the plant to enhance the company’s logistical efficiencies.

Apart from OMS, CMS’ other strategic investment in Score is in a joint-venture integrated phosphate complex project in Samalaju Industrial Park.

Lugun said phase one of the phosphate complex project is scheduled for completion and commissioning in 4Q20. Commercial production is targeted to commence in 1Q21.

The RM898mil phase one project will comprise three plants projected to have annual production capacity of 48,000 tonnes of yellow phosphorous, 75,000 tonnes of technical grade phosphoric acid and 60,000 tonnes of food grade phosphoric acid.

The first yellow phosphorous furnace is expected to be commissioned by 4Q20, followed by the remaining yellow furnaces and commencement of the production of the technical grade and food grade phosphoric acid.

CMS, via its wholly-owned subsidiary Samalaju Industries Sdn Bhd, has a 60% stake in the JV firm Malaysian Phosphate Additives (Sarawak) Sdn Bhd (MPAS) which undertakes the project, and its two other partners are Malaysian Phosphate Ventures Sdn Bhd and Arif Engima Sdn Bhd.

Lugun said the plant has secured 60% long-term commitments for raw material supply and product offtake.

MPAS is also targeted to generate RM100mil per year in five years’ time in PATNCI to CMS group when both phase one and two are completed by 2023.

The strategic investment in OMS and MPAS represents a diversification from CMS group’s traditional businesses in cement manufacturing, road construction and maintenance, construction materials and trading as well as property development.