KUALA LUMPUR: Ageson Bhd targets to ship 50,000 tonnes of river sand a month to China and Hong Kong by December this year following the its recent decision to diversify into sand mining business.
The company, which is allocating a capital expenditure of RM8 million for the diversification, is targeting to export five million to eight million tonnes of river sand a year starting 2021.
Executive director Datuk Larry Liew Kok Leong said the company had on October 6 announced the plans to diversify into sand mining.
"When we came into the management team earlier this year, we decided to reduce the company's reliance on its existing core business as well as to expand its earnings base.
"We identified the sand mining business as it complements the group's existing business and is an upstream expansion.
"Sand is an essential raw material used for various building materials including concrete, mortar, plasters and to fill areas beneath flooring.
"Hence, the sand mining actually complements our existing core businesses," he told the New Straits Times.
River sand is widely used for construction material and in high demand due to the rapid pace of construction and reclamation works in China and Hong Kong.
Ageson has secured letters of intent (LOI) and award to supply sand in bulk to overseas customers.
These include LOI from Boyijun Resources (HK) Ltd for the supply of natural sand with a contract value of RM110.6 million for a period of up to December 2021.
It has also secured an LOI from Techpack Solutions Co Ltd for the supply of silica sand with a contract value of RM330.7 million for five years.
The company has also secured a RM27.4 billion contract from Guangzhou Kaishengda Industrial Co. Ltd for the supply of river sand and river mouth sand for 15 years.
"We source our sand from our joint venture (JV) agreements with Bintang Dayang Sdn Bhd (BDSB) for river sand and Menteri Besar Kedah Incorporated (MBI Kedah) for silica sand," Larry said when asked where the river sand mining would be carried out.
"This is our first venture with BDSB and MBI Kedah to undertake the sand business activities and our joint venture is based on profit sharing according to the shareholding proportion," he said.
MBI Kedah will grants the right and full authority for Ageson to undertake new silica sand mining activities at new concession areas in Bukit Buluh, Mukim Serdang, Bandar Baharu, Kedah and other new prospective concession sites to be identified in the state.9
Apart from Malaysia, Ageson will also carry out river sand mining in Cambodia and the Philippines.
Liew said the contracts from its main clients for river sand and silica sand range from one year to 15 years.
"This would generate sustainable recurring income to the group," he said.
Liew said the company was expecting better results in financial year (FY) 2021, driven by the venture into sand mining business, which will start in 4Q 2020.
"We are also in the midst of finalising some property development projects that involve the state government.
"This is the next catalyst for Ageson, as these projects include a leasing structure for the next 20 years.
"We want to build Ageson to be a company that can weather business disruptions as a result of the pandemic and a strong dividend yield company," he said.