European Nickel Signs Caldag Project Termination Pact With BHP
July 08 2009 - 3:00AM
Dow Jones News
European Nickel PLC (ENK.LN), an emerging mid-tier nickel
laterite producer, said Wednesday it has signed a termination
agreement with BHP Billiton, pursuant to which BHP Billiton has
agreed to release the company from all of its obligations under the
off-take agreement in relation to the company's Caldag project, in
Turkey.
MAIN FACTS:
-As previously announced and in accordance with the heads of
agreement signed with Jiangxi Rare Earth and Rare Metals Tungsten
Group Company Limited (JXTC) in December 2008, following signature
of the Termination Agreement European Nickel intends to enter into
a new off-take agreement with JXTC.
-The company has also signed a $4 million Facility Agreement
with Endeavour Financial Corporation to provide bridge loan finance
pending completion of the proposed $20 million equity investment by
JXTC in Caldag.
-The successful conclusion of negotiations with BHP Billiton is
an important step towards finalising the acquisition by JXTC of a
20% equity interest in Caldag and the progression of the debt
finance facility being arranged by China Tianchen Engineering
Company. European Nickel is confident of completing this by the end
of the year.
-Originally, only 50% of Çaldag's off-take was going to be sold
to JXTC but this has been increased to 100% by mutual agreement to
facilitate the 100% debt financing of the project from a Chinese
bank.
-The terms of the termination of the BHP Off-take are a payment
of $10 million on first drawdown of the project finance facility
and a further 24 monthly payments of $1 million, starting once
nickel output has reached 50% of the Caldag plant's design
specification of 20,400 tonnes per annum of contained nickel.
-The maximum funding cost of the Caldag project has not
increased as a result of the payments due pursuant to the
Termination Agreement.
-The initial payment of $10 million to BHP Billiton is more than
offset by the reduced current market prices of consumables at the
Caldag project, particularly sulphuric acid where the price has
dropped very significantly since the estimate used in the last
announced project evaluation.
-The monthly payments start after maximum drawdown and are
treated as operating costs.
-By London Bureau, Dow Jones Newswires; +44 (0)20 7842 9296; ian.walker@dowjones.com