DBS and BNP Paribas lead a US$625 million project financing for a nickel smelter in Indonesia, developed by PT Halmahera Persada Lygend, a joint venture between Indonesia's Harita Group and Chinese mining company Ningbo Lygend.

Aside from DBS and BNP Paribas, the syndicate includes Bank Mandiri, Bank Central Asia (BCA), Bank Negara Indonesia (BNI), Maybank, Overseas Chinese Banking Corp (OCBC), OCBC NISP, and United Overseas Bank.

Halmahera Persada Lygend (PT HPAL) is the first project in Indonesia to use high-pressure acid leach (HPAL) technology to produce mixed nickel-cobalt hydroxide precipitate (MHP) and nickel sulphate, key materials for making electric batteries.

The smelter is located on Obi Island in eastern Indonesia, and will have an annual capacity to produce 36,000 tonnes of nickel content and 4,400 tonnes of cobalt content in the first phase.

Integral role

As the global demand for electric vehicles (EVs) grows, demand for storage and battery metals will correspondingly increase, and HPAL smelters will play an integral role in the EV supply chain.

The project had been expected to be commissioned in the second half of 2020, but delays resulted from, among other things, Covid-19 travel restrictions which slowed down visits of technical experts from China.

The Lygend plant is one of several Chinese-backed HPAL projects for processing nickel ore in Indonesia, with sizeabe domestic and export customers already lined up, many from China.

Tan Su Shan, group head of institutional banking and president commissioner at PT Bank DBS Indonesia, says the project will support Indonesia's plans to develop a global EV supply chain onshore. The Southeast Asian country holds the largest share of the world's nickel reserves.

Financing structure

As a lead coordinator and mandated lead arranger for the project, DBS developed the financing structure to address the challenges in the development stage of the project and exposure to benchmark prices.

 "DBS' strong grasp of the project, commodity markets and battery technology was critical in jointly leading the diverse group of banks with varying levels of familiarity with smelting and battery technologies, to ultimately deliver the customized financing solution for PT HPAL," Tan adds.

There are several other major China-backed projects in the nickel and copper sectors, either under construction or already in operation. The Indonesia Morowali Industrial Park in Central Sulawesi Province involves the world's largest stainless steel producer Tsingshan, and produces nickel pig iron as well as stainless steel.

Tsingshan is also constructing a copper smelter at Indonesia Weda Bay Industrial Park on Halmahera, the largest of the Maluku Islands, in a joint venture with New York-listed Freeport-McMoRan.