West Perth-based mineral explorer Albidon Ltd has signed an offtake agreement for its Munali Nickel Project in Zambia with Chinese giant Jinchuan Group Ltd worth over US$25 million.
West Perth-based mineral explorer Albidon Ltd has signed an offtake agreement for its Munali Nickel Project in Zambia with Chinese giant Jinchuan Group Ltd worth over US$25 million.
The full text of a company announcement is pasted below
Munali Nickel Project
The Munali Project (100% Albidon) is located approximately 60 kilometres south of Zambia's capital city Lusaka. The Munali project area comprises the Enterprise Deposit and a number of other nickel prospects in the Munali Intrusion, the most advanced of which is the Voyager prospect along strike to the north of Enterprise.
A positive Bankable Feasibility Study was completed in July of this year and site works commenced in September, following receipt of all required approvals. A capital raising was completed in October to provide US$35 million of equity finance for the project funding. Debt financing discussions are ongoing with a number of banks and are expected to be concluded in the near future.
Offtake negotiations have been undertaken in parallel with the above activities, and these have now been successfully concluded with the signing of the agreement with Jinchuan.
Offtake Agreement and Offtake Financing
The offtake arrangements agreed between Albidon and Jinchuan comprise several agreements, as follows.
A facilitation agreement has been signed that provides a framework for the execution of a suite of documents, each of which is conditional on the others, in relation to:
- the purchase by Jinchuan of all nickel concentrate derived from the Munali Project and any expansions of it;
- a subordinated project financing facility under which Jinchuan will provide funds totalling US$20 million for development of the Munali Project; and
- the subscription by Jinchuan for shares in Albidon with a total value of US$5 million.
The Offtake Agreement has been signed, and agreement has also been reached between Albidon and Jinchuan on the substantive terms of the subordinated financing and the placement of shares.
The Offtake Agreement was signed following a protracted process of negotiation with a number of major nickel companies. These discussions were ongoing throughout the course of 2006, and the final outcome is a set of highly attractive terms for the sale of Munali nickel concentrate containing commercial quantities of copper, cobalt, platinum and palladium.
The in-principle terms agreed for the subordinated debt are attractive and form an important part of the Company's strategy to develop a funding package based on an optimal mix of bank debt, subordinated debt from the offtake partner, and equity financing.
The pricing proposed for the share placement is the volume-weighted average price of Albidon shares trading on ASX in the 45 calendar days before the date of signing of the Offtake Agreement.
The subordinated loan and placement are subject to the finalisation of formal agreements which the Company and Jinchuan are currently completing in accordance with the facilitation agreement.
Jinchuan Group Ltd
Jinchuan is China's largest producer of nickel, cobalt and platinum group metals and is a major producer of copper. The Jinchuan Group's current nickel production is approximately 100,000 tonnes per annum, with a target to reach 150,000tpa by the year 2010.
The purchase of high quality concentrates such as those from Munali is a key part of Jinchuan's strategy to meet this goal.
Jinchuan has a long-standing commitment to technological innovation in the concentration, smelting and refining of nickel, cobalt and platinum group metal products. Albidon and Jinchuan intend to work together on the design and construction of the Munali concentrator to optimise the grade-recovery performance for all metals to the benefit of both companies.
Albidon is pleased to welcome Jinchuan Group as a partner and shareholder, and the Company looks forward to examining possibilities for collaboration with Jinchuan on other metal projects in Africa.
Forward Programme for Munali
Following completion of the Bankable Feasibility Study, the recent US$35 million institutional share placement,and finalisation of the Offtake Agreement, the implementation of the Munali Project will be accelerated, with a focus on the following key areas of activity:
- - Appointment of senior lenders to provide bank debt finance for the project.
- - Site preparation including mobilisation of the mining fleet, excavation of the boxcut for the decline, and construction of access roads.
- - Placing orders for major items of equipment that have long lead times for delivery.
- - Drilling of additional water bores to provide construction water in addition to assisting in dewatering the near-surface portions of the mine.
