MZI Resources gains debt funding, underwrites Keysbrook development
MZI Resources (ASX: MZI) has pulled off a mighty coup in today's tougher capital markets with a heady US$64 million (A$68.2 million) in project debt funding from RMB Australia Holdings, demonstrating just how profitable Keysbrook will become when in production.
Combined with the previously announced
US$41.5 million funding package to be provided by Resource Capital Fund
VI, MZI is now fully funded for the construction and development of
This paves the way for construction to commence in late June 2014 with first production scheduled for mid-2015.
The debt funding offer represents a significant vote of confidence in Keysbrook from leading resource financier FirstRand Group.
It is fully underwritten by RMB Australia Holdings Limited and was arranged by RMB Resources Limited, both part of FirstRand.
MZI chief executive officer Trevor Matthews said the project debt was the final key ingredient needed for the development of Keysbrook.
“In our view, having two highly regarded financial institutions express their confidence in Keysbrook through the provision of funding is a sign of the project’s technical and economic strength,” he added.
“Our feasibility studies show that Keysbrook will generate strong returns, even at this relatively low point in the mineral sands economic cycle.
“Based on forecasts provided by mineral sands analysts, the recovery in the feedstock demand cycle should be well underway by the time Keysbrook comes into production, leaving MZI ideally placed to benefit from the project’s relatively low capital and operating costs, premium product suite and access to key markets.”
Chairman Mal Randall said finalising the funding package for Keysbrook marked a pivotal point in the company’s growth.
“This is the culmination of much hard work by the MZI team. I thank them for their persistence, which I have no doubt will pay handsome dividends for the Company and its shareholders as Keysbrook is developed and brought into production.”
Project Debt Facilities
The Project Debt Facilities comprise a US$50 million Senior Debt Facility, a US$3 million Working Capital Debt Facility and a A$12.124 million Bank Guarantee Facility.
The Senior Debt Facility has the following key terms:
- US$50 million construction and amortising term loan, with final repayment on 31 December 2018; and
- Interest at a margin of 4.75% per annum above the US$ LIBOR rate pre-project completion and a margin of 4.25% post-project completion.
The Working Capital Debt Facility has the following key terms:
- US$3 million facility, to be available from commencement of mining of ore and production of HMC from the wet plant at Keysbrook; and
- Interest at a margin of 4.00% per annum above the US$ LIBOR rate.
The Bank Guarantee Facility has the following key terms:
- Guarantee amount of up to A$12.124 million to provide bank guarantees securing Keysbrook’s obligations under Western Australian Environmental Protection Agency approvals and landowner agreements;
- Facility to be available for the term of the Senior Debt Facility.
The finalisation of the Project Debt Facilities and RCF funding package is subject to the agreement and execution of formal financing and security documentation, which is expected to be concluded in June 2014.
The timing for the shareholder general meeting to approve the funding is expected to be late May/early June 2014.
Keysbrook Mineral Sands Project
MZI already has offtake agreements in place covering approximately 50% of the forecast annual revenue from Keysbrook and approximately 60 per cent of forecast annual production.
Discussions are well advanced on offtake agreements for its high-grade L88 titanium dioxide product.
The Keysbrook Project will produce an average 91,000 tonnes per annum of mineral sands products from 110,000 tonnes of dry heavy mineral concentrate. This comprises:
- 26,000 tonnes per annum (dry) of leucoxene 70% titanium dioxide;
- 36,200 tpa (dry) of leucoxene 88% titanium dioxide (L88); and
- 28,700 tpa (dry) of zircon concentrate.
Heavy mineral concentrate will be trucked about 120 kilometres to Doral’s mineral separation plant, which is just 10 kilometres from the Bunbury Port, for toll treatment.
Keysbrook has total development costs of A$64.3 million and is expected to have LOM average operating costs of A$34.1 million per annum, or A$379 per tonne of product.
It has total Proved and Probable Ore Reserves of 26 million tonnes grading 2.6% for in situ total heavy minerals of 670,000 tonnes. This is sufficient for a mine life of 5.5 years with potential for extension to more than 15 years.
There is no doubt that MZI Resources has scored a major coup with the US$64 million in project debt funding from RMB Australia Holdings as it highlights the confidence that FirstRand Group – RMB’s parent – has in the Keysbrook Mineral Sands Project.
This is especially true given today’s tougher capital markets where a project has to really stand out in order to secure the required financing.
Now fully funded – when combined with RCF’s US$41.5 million funding package, construction at Keysbrook will commence in late June 2014 with first production scheduled for mid-2015.
That Keysbrook will generate strong returns, even at the current low point in the mineral sands economic cycle, is a testament to the strong project economic metrics.
With a likely recovery in the feedstock
demand cycle underway by the time Keysbrook comes into production, MZI
is set to reap higher margins from its premium product suite.
Proactive Investors maintains its valuation and share price target of $0.042 to $0.055 for MZI within the next 6-9 months.
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