Moly Mines Limited (TSX:MOL)(ASX:MOL) has provided an update on its project financing activities for the Spinifex Ridge Molybdenum / Copper Project.
Project Financing Status
The Company can confirm that it has received a commitment letter from China Development Bank (CDB) for up to US$250 million which will be applied toward half of the planned US$466 million Syndicated Secured Senior Finance Facility (Finance Facility) for the development of the molybdenum/copper mine. This follows approval by the bank's credit committee of the Finance Facility for the mine. The commitment letter demonstrates CDB's support for the Project. However, availability of loan funds remains conditional on agreement to financing documents which will contain various conditions precedent to signing and to drawdown.
The Company has also been advised by Hanlong that a commitment letter for the remaining half of the planned Finance Facility is expected to be received from China Export and Import Bank (EXIM) after the Chinese New Year.
The Term Sheet for the Finance Facility is in an advanced form and is expected to be finalized at the time that EXIM provide their commitment letter. The Term Sheet stipulates that the loan will have a 12 year term and a US LIBOR plus margin based variable interest rate, which would be below 5% per annum today. It will be fully secured by Moly Mines with credit support provided by the Sichuan Hanlong Group, the owner of Moly Mines major shareholder, Hanlong Mining Investment Pty Ltd (Hanlong), by way of specific asset securities and parent company guarantees.
Moly Mines Managing Director and CEO Dr Derek Fisher said "the receipt of the commitment letter from CDB and confirmation that EXIM is in the final stages of their approval process and that the Term Sheet is largely agreed is a significant step forward in the financing cycle for the Spinifex Ridge Molybdenum / Copper Project. I particularly want to acknowledge the Chairman and founder of Hanlong, Mr Lui Han, who has backed his and his company's strong belief in the Project by undertaking to also provide the banks with a personal guarantee for this substantial debt."
Dr Fisher also commented that "the progress on the Term Sheet and the banks' various stages of commitment are the result of many months' negotiations and consultation between executives of CDB, EXIM, and our companies. The staff of Moly Mines and Hanlong have put in an enormous effort to bring this financing to this important point in the financing cycle."
Hanlong Managing Director Dr Steven Xiao said "Hanlong has always devoted itself to the commitment of procuring the Finance Facility and building a great mine for Moly Mines. We have full confidence that we are now very close to securing the funding for the Project. The receipt of CDB's commitment letter and the progression to the final stage of negotiation of the Term Sheet with the banks are clear evidence of us getting there. Hanlong has a great vision about Moly Mines and its support for Moly Mines goes beyond merely developing a molybdenum / copper mine to incorporate a strategy for the Company's diversification into other commodities through mergers and acquisitions. Hanlong has the confidence and financial ability to make Moly Mines a significant mining player in Australia".
All conditions precedent are required to be satisfied by 8 July 2011 or the present commitment of CDB will lapse, unless otherwise extended. The Company also refers readers to the stock exchange announcement dated 18 January 2011 commenting upon project economics and in particular foreign exchange rates as at 31 December 2010.
Hanlong has confirmed it will also provide a further US$34 million in subordinated loans to meet their US$500 million funding commitment described in the Subscription Agreement dated 19 October 2009 (as amended). The total funding requirement for the Project will not be known until a Banking Base Case Financial Model is agreed with the banking syndicate over the coming months. The total funding requirement is likely to exceed the US$500 million debt funding and Moly Mines will consider alternative funding methods to meet this funding gap.