Condor Blanco Mines edges closer to €10 million funding for debt issue
Condor Blanco Mines (ASX: CDB)
has secured €10 million in funding to progress mining of its Marianas
magnetite tailings project in Chile and acquisition of hard coking coal
projects in South Africa.
This completes the Phase 1 funding
with the receipt of A2 rated European bonds that are securitised against
future cash flows from Marianas, which will reduce interest costs.
It
also follows the recent successful commercial scale trial processing of
a 200 tonne sample from the Marianas Magnetite Tailings Project, which
had allowed projected cash flows from treatment of Marianas ore as
security to tap European capital markets for debt funding.
The
company is now poised to commence processing of 60,000t of iron ore
under the Heads of Agreement with Lacerta Finance and Mining and within
three months of permitting, 100,000t/month to be reached before the
expiry of one year.
A desktop review of The Duel hard coking coal
project in the Limpopo province of South Africa that it has the right
to acquire under a HOA with Hong Kong company Signet Coking Coal Limited
is also nearing completion.
“We are very pleased to announce
that the first stage of funding has been completed by Condor. The bonds
have been transferred to Condor’s name and the next step will see the
financing completed through our European financial advisors,” managing
director Glen Darby said.
Phase 2 is now in progress and will see funding completed via a European bank with an existing book of similar loans.
European Bonds
The
€10 million funding is being made against future cash flows of the
Marianas Magnetite Tailings Project and full production at Marianas will
be financed out of the debt.
As part of the transaction, Condor has taken delivery of financial instruments able to act as additional collateral.
This allows a lower interest rate to be achieved relative to similar un-enhanced project finance.
Masafin
Clearing Financial Company has now transferred €10 million in face
value of Deutsche Bank AG Euro Bonds to Condor’s account.
These
bonds have been transferred to Condor to act as additional security for
the €10 million loan being made against upcoming cash flow from
Marianas. The bonds have a current principal value of €10,618,200.
Phase
2 of the financing is to monetise the instrument backed borrowing. This
will be done through a European bank with an existing portfolio of
similar loans and is expected to happen in the next 30 days.
Marianas
The
Marianas Magnetite Tailings Project covers the mining and upgrading of a
known supply of magnetite and hematite tailings located just outside
the mining city of Copiapo.
Condor Blanco holds 50% of the project and has the right to acquire 100% of this project prior to 30 June 2014.
Tailings
would be processed onsite into a saleable concentrate that would then
be transported to an iron ore export facility at Caldera via the
existing freeway.
The company has a Heads of Agreement with
Lacerta Finance and Mining, a Chilean mining contractor, that will lead
to the processing of 60,000t/month and within three months of
permitting, 100,000t/month to be reached before the expiry of one year.
Lacerta
will relocate its recently purchased magnetite plant and all necessary
mining equipment to Marianas on receipt of final mine permits.
The Duel Project
Condor
is in a Heads of Agreement with Hong Kong company Signet Coking Coal
Limited that grants it the right to acquire a majority stake of up to
50.3% in The Duel and Tshipise 2 projects
This is currently being
reviewed by an independent third party though an initial Project
Exploration Report stated that Tshipise could host multiple hard coking
coal projects while the The Duel project could easily supply the
majority of South Africa’s imported hard coking coal quota of between 3
million and 4 million tonnes per annum.
Based on available data,
The Duel project could produce two products, one a primary high-grade
coking coal and the other a secondary high-grade thermal coal.
The
ability to produce a high-grade thermal coal as a middling product
heavily reduces operating costs and expenditure, increasing the primary
product margin.
A drilling program is planned for The Duel to
JORC the resource as well as a definitive feasibility study (DFS)
program for The Duel is expected to be funded by Condor with costs
expected to range from €10 million.
The drilling and resource definition program will be run in parallel and are expected to be completed by November 2014.
Condor
will then be able to continue with acquisition of additional interest
in Signet subject to the terms of the Definitive Agreement.
The
tenements surround existing projects, and particularly the Makhado
(including Telema & Gray) and Mount Stuart Projects owned by Coal of Africa Limited (ASX:CZA).
These
projects have JORC compliant gross in situ tonnes of 879.74 million
tonnes and 407.16 million tonnes respectively, for a total of over 1
billion tonnes of which 466.62 million tonnes is at the highest
(measured) level of confidence.
Importantly, the position of the
coal seams on the CoAL tenements suggests direct continuity through the
south-western license of The Duel. This has been confirmed by drilling
on The Duel in May 2012. The program consisted of two Reverse
Circulation drill holes (500m apart) and one diamond core drill hole to a
depth of almost 300 metres.
Analysis
With €10 million funding in place, Condor Blanco Mines can now focus on bringing the Marianas magnetite tailings project in Chile on stream and complete acquisition of the South African hard coking coal assets.
Cash flows from Marianas tailings will allow the company to tap further funding to ramp up production at the iron ore project. The South African projects also appear to be highly prospective with the company looking to either bring in a joint venture partner or adding value before making a trade sale to pay down debt.
Despite these developments, Condor Blanco Mines remains lightly rated at its current share price of just $0.006, (market cap of $2 million) if a line is taken through ASX-listed Universal Coal (ASX:UNV) which is now capped at $44 million after its South African coal project is close to delivering its first coal in March.
Universal is ramping up its Kangala mine, in Witbank, Mpumalanga to 2.1-million saleable tonnes a year, selling coal to South African power utility Eskom and export markets through an offtake agreement.
So while early days, Condor's coal projects in South Africa look to have potential to put its current market cap of circa $2 million to shame and tilt growth in valuation from Marianas to the coal projects.
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