Vulcan Resources Ltd, a base and precious metals development and exploration company working in Finland, has become the latest in a string of companies to feel the pinch thanks to the financial crisis affecting markets around the globe.
Vulcan Resources Ltd, a base and precious metals development and exploration company working in Finland, has become the latest in a string of companies to feel the pinch thanks to the financial crisis affecting markets around the globe.
Vulcan believes that until off-take agreements are completed and equity markets recover or an alternative financing strategy is secured, expenditure on engineering in preparation for a start to construction activities at its Kylylahti copper-cobalt project in Finland should be deferred.
Below is the full announcement:
The Board of Vulcan Resources Limited (ASX: VCN, FSE: VUA, WKN: A0HHEF, Norwegian OTC: VCNR) has reviewed activities at its 100% owned Kylylahti Project in Finland.
Discussions with potential off-take partners have resumed following the end of the northern summer. A Letter of Intent was executed in April 2008 with Talvivaara Mining Company plc which envisaged the purchase and treatment of Kylylahti nickel-cobalt concentrate at itshydrometallurgical facility. The parties agreed in the Letter of Intent to undertake a joint technical study on the viability of treating concentrate at Talvivaara's facility. This study is continuing.
Vulcan's plans for debt finance have been progressing well with the company receiving extensive expressions of interest and detailed proposals from lending institutions. Vulcan has applied to Finnish Government agencies for support to the lending package through provision of guarantees and infrastructure grants. Any debt facility is subject to Vulcan completing its off-take negotiations and the Company securing its equity contribution to capital expenditure.
The Board of Vulcan believes that until off-take agreements are completed and equity markets recover or an alternative financing strategy is secured, expenditure on engineering in preparation for a start to construction activities at the Kylylahti copper-cobalt project this calendar year should be deferred. Deferring the commencement of site works will preserve Vulcan's significant cash balance (AUD34 million at August 31st) through a prudent and measured approach to expenditure over the balance of this year.
The decision to defer project expenditure is not a reflection on project economics, rather the project remains robust with the key commodities of copper and cobalt remaining well above the long termprices assumed in the Definitive Feasibility Study. The study assumed US$2.50/lb for copper and US$16/lb for cobalt, compared to current prices of US$3.15/lb and US$36.75/lb respectively.
The engineering to date and updated resource estimate later this year will permit a rapid resumption of project development activity when appropriate.
Talvivaara is a Helsinki based mining company listed on the main board of the London Stock Exchange and is included in the FTSE 250 index. Its main activity is the development of the nickelcopper-zinc-cobalt deposits in Sotkamo in central Finland. The mine and processing plant are 150 kilometres north of Kylylahti.
A number of parties have submitted offers to purchase Kylylahti copper-gold concentrates and these will be evaluated in coming months.
