Michael Kiernan's Precious Metals Australia Ltd has been forced to seek a new energy supply contract for its $300 million Windmurra vanadium project after Santos Ltd appeared to terminate a four-month old gas supply agreement.
Michael Kiernan's Precious Metals Australia Ltd has been forced to seek a new energy supply contract for its $300 million Windmurra vanadium project after Santos Ltd appeared to terminate a four-month old gas supply agreement.
The gas supply agreement was terminated after PMA and Santos disputed the terms of the orignal agreement, particularly around the need for PMA to complete financing by 31 July.
PMA has gone back to the energy market at a time when project developers have been complaining about their inability to lock-in long-term gas supplies at competitive prices.
Other project developers, including Gindalbie Metals Ltd and Newcrest Mining, have opted for coal-fired power because of the difficulty of locking in gas supplies.
Mr Kiernan, whose company Territory Resources Ltd is in the midst of a protracted takeover battle for his old employer Consoidated Minerals Ltd, became chairman of PMA in April 2007.
WINDIMURRA FUNDING AND GAS UPDATE
Precious Metals Australia (ASX:PMA) advises it has received debt funding proposals from two leading international banks, capable of completing the project financing of its world-class Windimurra vanadium mine, which is under development 600km north east of Perth.
The two funding proposals have been received in response to an extensive request for financing conducted by the company and are now subject to review by the PMA Board.
In April this year, PMA signed a three year agreement with Santos for the purchase and delivery of natural gas to the Windimurra mine. A condition of the agreement was for PMA to complete financing by 31 July 2007.
In early July, PMA advised Santos of the positive progress towards completion of funding for the Windimurra vanadium mine and requested an extension to the financing conditions precedent.
Such an extension was contemplated in the gas supply agreement and was supported by the advanced nature of PMA's financing negotiations.
Santos responded to PMA's request for an extension to the financing conditions precedent by purportedly terminating the gas supply agreement and offering a new agreement, with an extension of time, but on terms that were unacceptable to PMA. PMA has reserved its position with Santos.
As a consequence, the Company has recommenced discussions with the energy market and has been encouraged by the response to source alternative fuel supplies to operate the plant including gas, diesel or coal.
PMA is confident of securing an energy provider by late 2008 when the recommissioning of the mine is expected to be completed.
In January 2007, PMA completed a successful equity raising of $51.2 million and is in a strong position with $60.7 million cash on hand at 31 July 2007. PMA has sufficient cash reserves to continue the scheduled works program for the construction of the Windimurra vanadium mine until financing is completed.
