Indonesia-focused, Singapore-listed Silkroad Nickel is set to start its first shipment of nickel ore under a new supply agreement with Tsingshan in the next two weeks.

The companies signed an offtake contract estimated at over $90 million, based on the benchmark price for nickel ore set by the Indonesian government, Silkroad said in an exchange announcement this week. Silkroad produces laterite nickel ore in Morowali, Central Sulawesi, Indonesia.

The agreement now covers a total supply of 2.7 million tonnes of high-grade nickel ore from March 2021 to December 2022. The deal includes a minimum offtake of 50,000 t per month, Kallanish reports.

Silkroad’s ceo Hong Kah said the company is reading to deliver its first shipment under the two-year agreement “within the next two weeks and expects to gradually increase its production from April 2021 onwards to fulfil the new offtake commitments.”

He added the ore will be used to meet the increasing demand from the electric vehicles battery industry, which is also prompting Silkroad Nickel to invest in other parts of the supply chain to meet such buoyant demand.

“The group is in the process of investing in its downstream nickel pig iron processing facility in 2021 and intends to use part of the cash flows generated from this agreement to build its proposed RKEF (rotary kiln electric furnace) smelter project,” notes Kah.

In Janauary, Silkroad agreed to supply a minimum of 1m t of nickel ore from its mine in Indonesia to China's Ganfeng Lithium over a 10-year period.