Rainbow Rare Earths Phalaborwa project shaping up to be one of the lowest cost producers globally. Watch the video here.
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Anyone got any ideas how they're going to raise $450mln?
60% debt from a consortium of banks
40% equity or about $180m will come from offtake prepayment, project JV partner or stock issue in that order of preference. I am imagining that we sell about 50% of Araguaia for the equity if nickel stays around $16k.
I am expecting offtake prepayment and perhaps a small raise will be used to advance the project power lines roads and water pipes to add value as we raise equity.
I am expecting a 20% IRR hurdle for the outside equity.
there are other funding routes.....people like Anglo Pacific will loan money but based upon receiving a royalty when production starts......often traditional lenders are too risk averse so a combination of funding routes is required
I think as Vulcan suggested there will be a royalty agreement. I think it was said funding will kick off with this agreement possibly later this year, then the rest will follow in due course, during the first quarter next year.
Jeremy Martin said in an interview he had been offered offtakes, but was not going to sign any until immediately before signing the rest of the financing package.
...... Thus leaving three unencumbered mines in plain sight for some months.
The 60% debt 40% equity has been the aim for a while and is what is being worked towards.
The main debt element will come from the consortium of 7 international banks who are currently putting the deal together, you would normally have a lead bank with the largest percentage and the rest having smaller slices, unfortunately even though this is how such deals generally happen to balance the risk, many hands always make slow work in this scenario. So this will probably not be forthcoming before April 2021 but probably before July 2021.
However, a Royalty Agreement is nearing completion and should be complete and signed off probably in the next 3 months.
This may be with Anglo Pacific as they are one of the few companies that operate in the base metal space, the majority fight over the Gold & Silver producers. Plus there is a historical relationship between AP & HZM they signed a 6 yr option in 2010 for which they paid $500,000. This has since lapsed but it was $12.5 mill for 1.5% of revenues once production had started.
Things have moved on hugely since 2010 so it will be interesting to see what sort of deal has been struck.
This will not be an option,(whoever it is through) it will be a straight agreement with immediate upfront cash as Araguaia is construction ready and already employing project managers and hiring a construction team. So the cash will be used to commence construction work as soon as it is received rather than wait for the completion of the total finance package.
As mentioned by Luke2, JM has stated that although there are a number of offtakes on the table they will not be signing any until the full financing is near completion, possibly as the healthy nickel price makes negotiations easier but more likely that they simply want to present a complete package rather than a piecemeal one particularly as the final stages are within touching distance.
Before that of course we will finally get the Vermelho study probably first week in Sept.
For those, including me who have been on board this ship for a few years its great to see that its all coming together and due rewards will be forthcoming. GLA