BornOil acquires stake in Sabah’s sole clinker and cement plant

clinker and cement plant2

 Borneo Oil Berhad (BornOil) has entered into a supplemental agreement to acquire a stake in a group which owns the only integrated clinker and cement plant in Sabah.

In a statement to the stock exchange, the company said that it had entered into the agreement with Labuan-based MT 23 Resources Ltd (MT23) for the acquisition of 19.55 million shares representing a 19.5 per cent equity interest in Makin Teguh Sdn Bhd (MTSB) for a total purchase consideration of RM50.70 million.

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BornOil also has an option to purchase an additional 10.43 per cent of the equity interest in MTSB for a period of twenty-four months.

MTSB is in the business of manufacturing and trading of clinker, cement and related products, having been granted a license to manufacture clinker and cement at Ulu Segama Lahad Datu, Sabah.

The company also owns an integrated clinker and cement plant (“ILPP”) located at Lahad Datu – the only one of its kind in Sabah.

Currently, there are 12 integrated clinker and cement plants in Malaysia of which nine are in West Malaysia and two in Sarawak.

“The outlook for Sabah’s clinker and cement industry is favourable given the high cement prices in Sabah compared with the rest of Malaysia and ILPP’s proximity to the Brunei – Indonesia – Malaysia – Philippines East ASEAN Growth Area (BIMP-EAGA),” said the statement.

“The already high price of cement in Sabah has been made worse in recent months due to the drastic increase in logistics costs and fluctuation in foreign exchange rates.

“Sabah can no longer afford to rely on 100% imported clinker and cement. Therefore, the emergence of the ILPP in Sabah is timely,” added the statement.

It further said that Sabah has an annual demand of between 1.2 million to 1.4 million metric tons of cement per year. These numbers do not include the future development projects planned on the East Coast of Sabah, and the demand in the BIMP-EAGA region with close proximity to the east coast of Sabah.

The statement explained that there is synergy between BornOil’s existing limestone quarrying business operations and MTSB’s clinker and cement plant, among which include the ILPP being situated adjacent to BornOil’s limestone quarry lands.

BornOil is today the largest private owner of limestone reserves of cement grade quality in Sabah and has heavily invested in the resource.

MTSB has also entered into a long-term supply contract for limestone with BornOil’s subsidiaries on the current stockpile and overburden waste from existing quarrying operations to supplement the ILPP’s initial limestone feedstock requirements.

“This supply of current stockpile and recovery waste for down streaming activity is also in line with the BornOil group’s initiative towards zero waste and reusing/upcycling all materials,” the statement further said.

“This synergistic alliance will enable MTSB and BornOil to pool their combined limestone resources and position the BornOil group for future expansion.

“The acquisition presents an opportunity for the BornOil group to move downstream its quarrying resources to further boost profits,” it added.