A new study has highlighted the robust financial project economics of a proposal by Gulf Manganese Corporation to construct a smelter near Kupang in West Timor to produce high carbon ferromanganese alloys. The study show the smelter could return EBITDA of US$623.8 million over 20 years.

Gulf Manganese, formerly Gulf Minerals, intends for development of the smelting and sales marketing business to be carried out through its Indonesian-based subsidiary, PT Gulf Mangan Grup.

The financial analysis of the study shows that the EBITDA would support an estimated Net Present Value of US$201.4 million, using an 8% discount factor.

Gulf Manganese chairman Graham Anderson says, “We are pleased to be able to provide shareholders with this study as it further validates our early belief of the highly prospective nature of the project and our ability to stage a process of ultimately delivering a highly profitable outcome for all shareholders.”

As described in the study, Gulf will develop a fully integrated manganese business that provides the following value propositions:

  • Sound project economics;
  • Operating costs at 80% industry average cost;
  • Highest quality ore supply (+50% manganese);
  • Producing a premium manganese alloy (78% manganese);
  • Established port and infrastructure;
  • Government full support, fiscal incentives of 10 year tax holiday;
  • Board/management depth of manganese and Indonesian experience;
  • Global sales network;
  • Modest capital requirement;
  • Early cash flow from exporting ore;
  • Proposed Singapore listing; and
  • Robust dividend policy with distribution of 50% of profits.


The company plans to build eight furnaces over a four year period that will produce a premium quality 78% ferromanganese alloy resulting from the unique qualities of the Indonesian high-grade low impurities manganese ore.

It requires a modest start-up capital investment of US$67.5 million, which is staged over 4 years, plus working capital, and provides estimated returns supporting an internal rate of return of 45.6%.

High grade manganese ore will be purchased locally from Timor and blended with medium grade high iron manganese ores sourced from Africa.

In the first year, high grade manganese ores will be purchased and treated via a jigging process to produce lump manganese ore. This will be exported to provide early cash flow whilst the first smelter is being built.

To optimize the smelting process high grade ore will be purchased locally from artisanal miners and others in Timor. The manganese ores in Timor are typically high grade, approximately +50% and make ideal smelter feed. The local Timorese manganese ores are typically low in iron content and as such iron units need to be added.

Gulf has entered into an agreement to secure 50 hectares of land with the landowners and the local Regent for the development of the proposed smelter. The site was chosen as it is close to the port of Tenau in Kupang which will minimize consumable import costs and export logistics costs, as well as being close to the coast permitting use of sea water for power station cooling systems.

Gulf has engaged specialist Australian engineering group, Como Engineers, to oversee the engineering and project management of the proposed smelters. Como has produced budget level drawings and costings for the supply and operation of a smelter and associated power station.

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