25/03/2014 - 15:44

Sundance inks 10-year offtake deal

25/03/2014 - 15:44

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Sundance Resources says it is confident of attracting financiers to its Mbalam-Nabeba iron ore project after securing a 10 year off-take arrangement with commodities trader Noble Resources International.

Sundance inks 10-year offtake deal
Sundance Resources chairman George Jones.

Sundance Resources says it is confident of attracting financiers to its Mbalam-Nabeba iron ore project after securing a 10-year offtake arrangement with commodities trader Noble Resources International.

Noble has agreed to purchase 100 per cent of production from Mbalam-Nabeba over 10 years at the Platts 62 per cent index price, which was this morning trading at around $US110 per tonne.

Based on the project's forecast annual production of 35 million tonnes, the offtake deal could be worth almost $US36 billion on the current price.

However the deal will allow equity funders to secure offtake related to the size of their contribution, meaning Noble's off-take could be reduced to as low as 50 per cent of total production.

Sundance managing director Giulio Casello said the company believed the offtake agreement would boost the chances of the project securing much-needed debt financing.

"Having Noble sign such an extensive sales agreement is a huge vote of confidence in the project and we believe it will give financiers the comfort they need to provide debt funding," he said.

Sundance has put the capital cost of the Mbalam-Nabeba project at $US4.7 billion but has struggled to secure financing after last year terminating a $1.3 billion takeover agreement with Chinese company Hanlong Mining.

Under the company's new strategy for the project, it has elected to financially separate development of the project's port and rail infrastructure from the mine development and its associated iron ore product sales.

The lion's share of the project's estimated $4 billion rail and port infrastructure construction costs will be debt-funded and backed by take or pay contracts from the mine.

The remaining estimated $1 billion mine development costs will be funded through a combination of offtake agreements and partial project equity sales. 

Sundance said today it had narrowed its options for the port and rail development to two preferred bidders, with the intention of inking an exclusivity arrangement with the preferred bidder in the June quarter.

The company's shares closed the day's trade 1 cent higher at 9.9 cents.

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