Tiger Resources has mandated two South African banks to arrange a debt financing facility for stage two of its African copper project as results are released from the definitive feasibility study.
West Perth-based Tiger today said it had instructed Nedbank Capital and Rand Merchant Bank to arrange an $US80 million facility to support the second stage development of the Kipoi copper project in the Democratic Republic of Congo.
The funds will help push Tiger towards its goal of becoming a minimum 50,000 tonnes per annum copper cathode producer at Kipoi, with stage two to start production in 2014.
The facility will provide “maximum flexibility” for the construction of stage two although the development could be funded from cashflow from the existing stage one operation at Kipoi, Tiger said.
Managing director Bradley Marwood said the facility will provide a “prudent buffer in financing stage 2 of the development”.
Nedbank and Rand will approach the Export Credit Insurance Corporation of South Africa (ECIC) for its support of the facility, with due diligence to be carried out by all institutions shortly.
Kipoi’s 40 per cent project partner, Gecamines is currently reviewing the facility. Tiger holds a 60 per cent interest in the project.
Nedbank and Rand will also jointly underwrite a $30 million facility, which will be available for drawdown in advance of final approval from the ECIC.
“A further benefit of the debt facility will be the provision of 25% hedging of HMS [heavy media separation] production (approximately 13,000t Cu) and early SXEW [solvent extraction electrowinning] production (approximately 30,000t Cu over first 3 years of production),” Mr Marwood said.
“This will stabilise cash flows and returns, thereby further reducing risk of the project development plan.”
The initial project capital cost for the stage two SXEW operation at Kipoi has been pegged at $160.9 million, results from the definitive feasibility study show.
Annual production will initially be at 25,000t of copper, with cash operating costs at $US0.72 per pound during the first two years with no additional mining, before increasing to an average of $US1.13/lb over the life of the mine.
The after-tax net present value has been estimated at $US378 million using an 8 per cent discount rate and a copper price of $US3.40/lb between 2014 and 2017, and $US3/lb thereafter. This would generate an internal rate of return of 44 per cent, Tiger said.
Shares in Tiger closed up 2.5c to 35.5c today.
