MSC looking at M&As to strengthen position

PETALING JAYA: Pursuing more mining-related mergers and acquisitions (M&As) in Malaysia and abroad is one of the strategies of Malaysia Smelting Corp Bhd (MSC) to strengthen its position.

Group chief executive officer Datuk Patrick Yong told StarBiz that “we are certainly heading towards this direction as there are still plenty of untapped deposits.

“The exploration in the areas that we are targeting have also shown encouraging results.”

MSC is one of the world’s largest integrated tin producers. Its smelting operation involves converting tin ore into usable tin metal of various purity and a service fee is charged according to the tolling contract.

The group is also the world’s largest toll smelter serving customers who bring in ore from all over the world, including its own mines managed by its subsidiary, Rahman Hydraulic Tin Sdn Bhd (RHT), in Klian Intan, Perak and Sungai Lembing, Pahang.

Said Yong, “It is our plan to revive tin mining in Perak and Malaysia in general to a significant level, which should be within our reach.

“This is because MSC has established a base in RHT, where we now have the technical knowhow and financial strength to actualise this.”

At the same time, MSC is considering the wisdom of mining outside Malaysia, he noted.

“While our management is not going to be as comfortable when compared to operating at home, this is not to be ruled out in the near term.”

Earnings-wise, Yong said the group derived its income mainly from the smelting and mining businesses.

“Our toll smelting business is a steady income stream that is not affected by the tin price, but only slightly by the US dollar rate, as tolling charges are in the US-dollar denomination.

“Since toll rates are cost plus, it’s a well-hedged business,” explained Yong.

On the other hand, the group’s mining operation tends to benefit most “when tin prices are high together with the US dollar, which was especially shown in 2021 and the early part of 2022,” he added.

Therefore, MSC’s two income activities complement each other very well in a low risk and well-covered business combination.

“However, the ratio of intensity is currently still not ideally balanced,” he pointed out.

Once the group’s upgraded new smelting plant in Pulau Indah runs at full capacity, Yong said it will be capable of smelting 40,000 to 60,000 tonnes of ore annually.

MSC’s mines plus local ore supply is currently at 7,000 to 8,000 tonnes, and may only reach 14,000 tonnes in a few years.

The rest of the capacity is occupied by toll smelting external ore.

Yong said, “Hence, the obvious step forward is to increase mining activities to occupy 40%-50% of our smelter capacity to reap maximum benefits of high tin prices when the cycle peaks, and also be comfortably profitable when tin prices plateau.

“MSC is already actively acquiring more mining leases as reflected by the group’s recent acquisition of Asas Baiduri Sdn Bhd and possibly more around the vicinity of RHT.”

Asas Baiduri has been granted a mining lease over a parcel of land adjacent to RHT’s mining land in Perak..

Yong explained, “Initially, Asas Baiduri will be contributing indirectly by giving relief to RHT in terms of space for tailings storage and sludge ponds.

“There is a pressing predicament in RHT, where a lack of such facilities is impeding future mining operations in our current leases.”

This relief will immediately allow RHT to carry on fast mining of the remaining deposits over the remaining 22 years of mine life.

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