(Alliance News) - Tungsten West PLC on Tuesday reported that it has signed a non-binding term sheet for a USD30 million royalty investment.
Shares in the London-based mining company were trading 21% higher at 29.00 pence each in London on Tuesday afternoon.
The royalty sale, signed with a global mine royalty investment fund, will help finance the construction of the Hemerdon project. The company says the Hemerdon project is the world's third-largest tungsten resource.
Tungsten West is working towards agreeing definitive documentation and meeting the conditions on the sale of the royalty.
These conditions include a site visit by the royalty holder and obtaining required shareholder, director or regulatory approval. The company said it "has confidence" that the conditions of the drawdown will be met.
The royalty rate is 4.8% until the successful production, processing and sale of seven million metric tonnes of tungsten trioxide at which point it will reduce to 2.4%.
In addition to the royalty sale, the company is in "advanced discussions" with asset backed finance providers to secure additional finance of between GBP5 million and GBP10 million secured against fixed and mobile equipment, and spare parts.
The company noted that it is not seeking a project finance facility. It expects the royalty and asset backed finance proceeds, plus cash on hand, to be "sufficient" to finance the company through to positive cash flow.
A construction schedule and final capex budget is expected to be received from the company's contractor, Fairport Engineering Ltd, by the end of September.
Executive Vice-Chair Mark Thompson commented: "The agreement of a non-binding term sheet for a royalty sale is an important step forward in securing the finance required to enact the plan. We have taken a conscious decision to seek a larger royalty sale, and no project finance debt, in the belief that this will better protect shareholders' long-term interests in these extremely volatile and unpredictable times."
By Chris Dorrell; chrisdorrell@alliancenews.com
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Tungsten West (TUN)