Tronox announced it has entered into an Option Agreement with Advanced Metal Industries Cluster Company (AMIC) to acquire 90% of AMIC's ownership in a titanium slag smelter facility (slagger) located in the Jazan City for Primary and Downstream Industries in the Kingdom of Saudi Arabia.
The execution of the Option Agreement occurred shortly after Tronox and AMIC entered into a Technical Services Agreement to provide certain technical assistance to AMIC to facilitate start-up of the slagger. AMIC is equally owned by the National Titanium Dioxide Company Limited (Cristal) and National Industrialisation Company, also known as Tasnee.
"The Option and Technical Services Agreements are another integral step for Tronox to further optimise the level of vertical integration between our production of TiO2 pigment and TiO2 feedstock following the closing of our merger with Cristal and across the cycle over the long term. By combining our slagger operations expertise with that of AMIC under the Technical Services Agreement, we will work together to ensure the successful commissioning and ramp up of this world-class smelter, which has the capacity to supply up to 500kt of TiO2 slag and 220kt of pig iron," said Jeffry N Quinn, president and CEO of Tronox.
"While we continue to work hard at securing approval from regulators in the US and Europe for the Cristal acquisition, the Option and Technical Services Agreements enable us to commence start-up activities now so as soon as the acquisition is approved, we can be in a position to acquire the slagger facility, assuming it meets the sustained output metrics agreed with AMIC."
As part of the Option Agreement, AMIC will create a special purpose vehicle (SPV) incorporated in the Kingdom of Saudi Arabia and contribute its ownership interest along with $322mn of debt currently held by AMIC (the AMIC debt). The company agreed to lend AMIC and the SPV up to $125mn for capital expenditures and operational expenses to facilitate the start-up of the slagger.
These funds may be drawn down on a quarterly basis as needed, based on a budget agreed upon by the company and AMIC. After completion of the acquisition of Cristal, but prior to exercise of the Option Agreement, Tronox and AMIC have agreed to supply one another, on commercial terms, ilmenite as a feedstock for the slagger and titanium slag produced by the slagger, respectively, to the extent available.
Upon reaching the sustained operations of the slagger as defined within the Option Agreement, Tronox will exercise the option to acquire a 90% ownership of the SPV. The total consideration payable by Tronox consists of the effective assumption of the AMIC debt through ownership in the SPV, the $125mn loan described above, a working capital adjustment and an adjustment to accurately compensate AMIC for 10% of the outstanding liabilities of the SPV as of the closing. The company and AMIC also have agreed that they will enter into a shareholders agreement relating to their respective rights and obligations as shareholders of the SPV.