15 Jun 2016 07:00
15 June 2016
Ormonde Mining plc
("Ormonde" or "the Company")
Barruecopardo Update
The Board of Ormonde is pleased to provide the following update on the Barruecopardo Project in Salamanca, Spain ("Barruecopardo" or the "Project"). This follows the recent administrative appeal by a third party in relation to an element of the compulsory land acquisition process at Barruecopardo. While the relevant authority has found against the appellant and in favour of the Project operating company (Saloro SLU), this process has, as previously announced, occasioned certain delays in the timeline for Barruecopardo. Further detail in relation to this matter is provided below.
· Independent expert legal advice has now provided clarity on the expected time period to completion of the compulsory acquisition process, given the experience of the recently resolved administrative appeal and the process of any subsequent appeals.
· As a result, the project partners (Ormonde and Oaktree) have now approved and adopted an optimised construction schedule for the Project, which will see commissioning in late 2017.
· The optimised construction schedule also aligns first production with a more positive forecasted tungsten price environment, reducing risk and optimising project valuations.
· Saloro has completed negotiations with the Project's debt provider in relation to amendments to the debt facility agreement (which remains undrawn) to reflect the new schedule, ensuring continued compliance with the agreement, and continued availability of the requisite capital.
· The focus of activities on the ground can now turn to implementing the new schedule including the commencement of water dam construction works.
· Tungsten APT prices have commenced a recovery recently rising to $210 per metric ton unit, ~30% above the low of $162 reached during January 2016. The outlook for tungsten in the short term is moderately positive, however medium to longer term forecasts predict substantial price rises.
Steve Nicol, Ormonde's Managing Director, commented:
"The optimisation of the project construction schedule is a balanced response to the contents of the expert legal advice relating to the likely timelines for the compulsory acquisition of the remaining land plots, and it more closely aligns first production with a forecasted improvement in tungsten prices, with the aim of optimising project valuation.
We will now commence implementation of this new staged construction schedule, commencing with construction works on the water dams, the continued installation of site services and other construction readiness works, and I look forward to updating shareholders on progress in these, and other areas, as the schedule advances."
Detail
Expert Legal Advice
With the assistance of Saloro legal counsel, advice was sought from a law firm with specialist expertise in administrative law and this has provided clarity both on possible appeal procedures associated with the current compulsory land acquisition process, and associated timeline estimates. This information has been taken into consideration by the project partners in the preparation of the optimised construction schedule for the Project.
Saloro sought this advice after the administrative appeal by a third party in relation to an element of the compulsory land acquisition process resulted in a delay to the process. The Board of Saloro considers this third party appeal to be merely vexatious, a belief that has been reinforced by the negative finding on this appeal (favourable to the Company's position) at the administrative level of this appeal process.
Avenues exist, however, for a subsequent appeal to be launched at an administrative court - a fact which has also been taken into consideration by Saloro in the preparation of the optimised construction schedule.
Optimised Construction Schedule
The project partners have approved for implementation an optimised Project construction schedule which balances the most likely scenarios with regard to possible compulsory acquisition timelines whilst also aligning the Project targeted first production date with expectations for a more favourable APT price environment.
This optimised construction schedule sees a prioritising of certain activities on lands already owned or rented by the Company, with a corresponding temporary deferral of works on other lands, including construction of the process plant. Significant components of the construction activities will now be advanced consecutively rather than concurrently. These changes to the Project timeline result in Project commissioning now being set for late 2017.
Saloro has also agreed certain amendments to the debt facility agreement in place (and undrawn) for the Project so as to ensure continued compliance with this agreement.
Tungsten Metal Price
APT prices have started to gradually move in an upwards direction from a low of $162 per metric tonne unit ("mtu") touched in January 2016 following a period which saw significant price reductions associated with a general weakening of the commodity price environment coupled with a significant drop-off in usage of tungsten in the energy sector, particularly relating to a significant reduction in US oil related drilling activity.
Currently the APT price is $210/mtu which represents a ~30% increase since their January lows. While the medium to longer term outlook is positive, with considerable price increases forecasted, the short term price outlook is more moderately positive with strong growth in certain use sectors (including aerospace and automobile) being offset by ongoing weakness in other areas (eg. energy).
A glossary explaining technical terms contained in this announcement can be found at www.ormondemining.com/en/investors/technical_glossary.
For more information please visit www.ormondemining.com.
Enquiries to:
Ormonde Mining plc
Steve Nicol, Managing Director Tel: +353 (0)1 8253570
Capital M Consultants
Simon Rothschild Mob: +44 (0)7703 167065
Murray Consultants
Mark Brennock Tel: +353 (0)1 4980300 Mob: +353 (0)87 2335923
Davy Corporate Finance (Nomad / ESM Adviser, Joint Broker and Financial Adviser) Eugenée Mulhern / Roland French Tel: +353 (0)1 6796363
SP Angel Corporate Finance LLP (Joint Broker)
Ewan Leggat Tel: +44 (0)20 3 470 0470
About Ormonde
Ormonde Mining plc is admitted to trading on the AIM market in London and the ESM market in Dublin and is a mineral development and exploration company focused on Spain (Ticker: ORM). In partnership with funds managed by Oaktree Capital Management ("Oaktree") through the joint venture company Barruecopardo JV BV (Ormonde 30%/Oaktree 70%), the parties are developing a low cost tungsten mining operation at Barruecopardo in the Salamanca Province to become a major European supplier of tungsten. Ormonde also has other exploration projects for gold and copper.