SINGAPORE (April 1): Over the last 20 years, Ivan Chee Yew Fei has been involved in various industries as founder and CEO of Webcon, a privately held diversified company in Malaysia. He led the company to expand into engineering and construction, property development, mining, trading of heavy machinery and investment holding. Now, as iron ore prices remain firm, Chee intends to grow the mining business under newly incorporated Fortress Minerals — by listing the latter on the Catalist board of the Singapore Exchange.
Fortress Minerals is a high-grade iron ore concentrate producer based in Terengganu, Malaysia. Through its wholly-owned subsidiary, Fortress Mining (previously known as Webcon Mining), the company operates an open pit mine at Bukit Besi, near Kemaman Port.
The Bukit Besi mine contains iron ore concentrate with a total iron grade of 65% and above. This enables the iron ore to fetch a relatively higher price on the market. The company sells most of the iron ore to trading companies and steel mills in Malaysia and China for the production of iron ore pellets and sinter.
Fortress Minerals was listed on Singapore’s Catalist on March 27. Under an all placement issue, the company sold 75 million new shares at 20 cents apiece, of which 51.25 million shares were taken up by cornerstone investors. They include property developer First Grand Investment, general contracting and metal scaffolding works company Teambuild Construction and several unrelated individuals.
With this listing, Fortress Minerals raised net proceeds of about $12.5 million. Of this, $7 million will be used for further development of the Bukit Besi mine, including continuing and future exploration and geology work, as well as expansion of iron ore processing capacity. Meanwhile, $2 million will be used for acquisitions, joint ventures and/or development of new mines. The remainder $3.5 million will be used as general working capital. The sponsor, issue manager and placement agent for the IPO is PrimePartners Corporate Finance.
On March 27, shares of Fortress Minerals started trading at 22 cents before ending the day at 21.5 cents. More than 2.5 million shares changed hands on the first two days of trading.
In an interview with The Edge Singapore ahead of the listing, Chee, who is also executive director and CEO of Fortress Minerals, says a listing on SGX will improve the company’s “visibility” for international growth ahead. “We believe our business will grow regionally beyond Malaysia. The listing will provide us with new opportunities,” he says.
From bauxite to iron ore
The principal mining business of Fortress Minerals is parked under Fortress Mining. The latter used to be involved in bauxite mining and prospecting. It took advantage of a bauxite rush after top producer Indonesia slapped an export ban on the mineral in 2014, says Chee.
As a result of the ban, prices of bauxite skyrocketed in that year. Other bauxite-producing countries such as the Philippines, Malaysia and Australia became unexpected beneficiaries. In particular, bauxite production in Malaysia more than quadrupled to 962,799 tonnes in 2014 from the year before, according to the country’s Minerals and Geoscience Department.
However, the increased bauxite mining in Malaysia — mainly in Kuantan — resulted in rampant pollution. This led the Malaysian government to impose a three-year nationwide ban on bauxite mining in January 2016. All bauxite mining activity, including Fortress Mining’s, ceased.
Fortress Mining took the opportunity to pivot towards iron ore mining. This was the result of Chee’s involvement in an iron ore mining project, which helped him forge ties with Lembaga Tabung Amanah Warisan Negeri Terengganu (LTAWNT), a stateowned enterprise and holder of the state’s mining leases.
As he explains it, one of Webcon’s subsidiaries was appointed as a subcontractor to construct a processing plant for Treasure Mining. The latter was appointed as the main contractor to extract, process and sell minerals at an iron ore mine in Malaysia. Chee says the Webcon subsidiary, despite a tough operating environment, completed the job with flying colours and created a good impression on LTAWNT.
Subsequently, LTAWNT invited Chee and other interested parties to tender for a mining lease for several tenements at the Bukit Besi mine. He did so because “most of the other mining players had ceased operations there”. Owing to its good track record, Fortress Mining was granted the lease to mine, extract, process and sell iron ore at the Bukit Besi mine.
Historic mine
Fortress Minerals, as a company, is new, but the Bukit Besi mine is not. The mine was first identified by Japanese explorers in 1916. The then Nippon Mining Co (today, part of JXTG Holdings) obtained a 50year mining lease for 1,271 acres and built the relevant mining infrastructure. By 1930, mining operations had commenced, and the company had 130 Japanese staff and a local labour force of 1,500, which quickly expanded to 3,000 as activity picked up. Following Japan’s surrender to the Allied forces in World War II, all Japanese-owned property in West Malaya, including the Bukit Besi mine, was held by the Custodian of Enemy Property.
In 1948, the Bukit Besi property rights, stockpiles and equipment were acquired by Eastern Mining and Metals Co, a US company. Subsequently, during the height of the Communist insurgency in the 1970s, EMMCO abandoned the mine, citing the prevailing economic downturn and depleting resources. As a result of the mine closure, the refineries were abandoned and remain as ruins in the Bukit Besi township area.
In 2009, the Terengganu state government announced that it had approved the appointment of several companies to revive mining at Bukit Besi. Exploration in the wider area recommenced. Fortress Mining was awarded the mining rights in 2017 and the company constructed an onsite processing plant. The lease will expire in early 2033.
Today, Fortress Minerals has a steady state actual production rate of 40,000 tonnes a month. It has sold a total of about 224,507 tonnes of processed iron ore concentrate since it began operations in April 2018.
For 1HFY2019 ended Aug 31, Fortress Minerals recorded earnings of US$2 million ($2.7 million) on the back of revenue of US$6.6 million. It had a net debt position of US$8.3 million as at Aug 31, 2018. In 1HFY2018, the company recorded a loss of US$546,000, as it did not register any revenue since it had not begun mining operations. Fortress Minerals mined and sold a total of about 873,000 tonnes of bauxite from January 2015 to January 2016 before operations were discontinued. It recorded revenue of about US$20 million.
While the moratorium on bauxite mining is expected to be lifted in April, according to Malaysian media reports, Chee says Fortress Minerals will not return to bauxite mining, as prices of the mineral are low compared with two years ago. Malaysia’s Water, Land and Natural Resources Minister Dr Xavier Jayakumar reportedly said that the country’s Cabinet had agreed to a new standard operating procedure covering mining and exports of bauxite.
Instead, Chee says, he sees bright prospects in iron ore mining for the company. This is because production could be ramped up as there is considerable exploration upside potential at the Bukit Besi mine. Currently, the company has explored a surface area of 61.3 acres within the East, Valley and West Deposits. These collectively represent about 4.71% of the 1,300.3 acres of total land area. “Our area is big,” says Chee. “Only less than 5% of the land area has been explored. We have also proven that we can get 5.4 million tonnes of iron ore in deposit.”
Moreover, demand for high-grade iron ore is expected to hold steady. Ng Mun Fey, chief operating officer at Fortress Minerals, says in recent years, China had closed many inefficient steel mills to reduce pollution. With lower production, prices have increased.
Ng says steel mills are demanding highgrade iron ore to increase their production yield. “The higher the quality of ore mineral, the more iron content is produced,” he says. “Because of that, we get so much demand from China clients as well as Malaysian steel producers. They keep asking for more.”
This story appears in The Edge Singapore (Issue 875, week of Apr 1) which is on sale now. Subscribe here
