LONDON (Alliance News) - KAZ Minerals PLC on Tuesday said it has secured a new USD300.0 million credit facility from the Development Bank of Kazakhstan JSC in order to fund the remaining work on the Aktogay copper project.
KAZ shares were trading down 2.6% to 403.10 pence per share on Tuesday morning.
The Kazakhstan-based miner has recently started to commission the sulphide concentrator at Aktogay, and KAZ believes the new facility will be enough to complete all the remaining work that needs to be done.
Mining operations started at Aktogay in the second quarter of 2015 and production of copper cathodes from oxide ore has been going since December 2015.
The project will start to produce copper concentrate from sulphide ore in the first quarter of 2017 once the concentrator on site has finished being commissioned and tested. The copper concentrate will be exported directly to customers in China.
The facility will be fully drawn before the end of 2016 and is expected to be formally signed and secured on December 14. The facility lasts for 8.5 years and the first repayment is due in June 2018.
After that first payment, KAZ will make semi-annual repayments in May and November of each year from 2019 until 2024 and a final repayment in June 2025. The facility has an interest rate of LIBOR plus 4.5% and has a covenant that is the same as the miner's existing facility from the China Development Bank, it said.
The covenant is based on a ratio of total liabilities to total assets, with adjustments to mitigate the translation impact of movements between the dollar and tenge exchange rate.
The sulphide concentrator is a huge project for KAZ, able to process 25.0 million tonnes of ore at full capacity with an estimated mine life of 50 years. Annually, Aktogay as a whole is expected to produce about 90,000 tonnes of copper cathode equivalent from sulphide ore and 15,000 tonnes of copper cathode from oxide ore in the first ten years of operation.
Aktogay will reach that annual target of 15,000 tonnes of copper cathode this year. The mine produced 12,000 tonnes of copper cathode in the first nine months of the year, representing about 12% of all production in the period after rising consistently every quarter throughout the year.
KAZ will produce between 135,000 to 145,000 tonnes of copper cathode equivalent from all of its operations in 2016, as it aims to deliver a huge lift from the 81,100 tonnes produced in 2015.
The total budget for Aktogay has been reduced but still stands at USD2.10 billion - being as high as USD2.30 billion only as recently as July. That has allowed KAZ to push some spending originally expected in 2016 into 2017.
That means even more spending has been pushed back into 2018, when the project will be operational, improving cashflow.
In addition, KAZ on Tuesday said the pre-export finance facility provided by ING Bank NV has been increased by USD50.0 million after KAZ utilised an accordion feature under its existing agreement. That also will be drawn down by the end of 2016, by which time the outstanding amount is expected to be USD283.0 million.
"As previously announced, the group intends to resume discussions with the pre-export facility bank syndicate over a longer-term refinancing of the facility, after release of its 2016 financial statements," said KAZ.
KAZ said that Caterpillar Financial Services (UK) Ltd has waived the testing of the ratio between the company's net debt and its earnings before interest, tax, depreciation and amortisation at the end of 2016 under the USD50.0 million facility from that lender.
"These transactions demonstrate the group's ability to access diversified sources of finance and the strong support KAZ Minerals enjoys from its lenders," said Chief Financial Officer Andrew Southam.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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