LionOre secures underwriting for Tati Nickel Activox and DMS project funding

Nickel producer LionOre Mining International Ltd said this week that it has secured Rand Merchant Bank (RMB) as the sole underwriter for a US$250 million project funding package for the Tati Nickel Activox and DMS projects in Botswana.

The TSX, LSE, ASX and BSE-quoted South Africa and Botswana nickel focused company, based in Toronto, said in a statement Monday that the financing will carry a weighted average interest rate of Libor plus one percent to total 6.37 percent.

LionOre requires a total of US$620 million after it, last year, received approval from the Botswana government to build a new Activox plant at its Tati Mine, which is north of the capital Gaborone.

It said the remaining funding required ”“ about US$370 million ”“ will be provided by cash currently on hand at Tati Nickel, which amounts to US$100 million, and from cash generated by Tati Nickel’s existing operations during the construction phase.

The Activox technology is a proprietary hydrometallurgical processing system for extracting base metals from sulphide concentrates that LionOre has been developing over the last two years.

It allows for the mining of deposits that were previously deemed to contain insufficient concentration of the metal. Apart from its three deposits ”“ Tati in Botswana, 50 percent-owned Nkomati mine in South Africa and the Honeymoon Wells project in Australia – LionOre plans to exchange rights to Activox for stakes in additional deposits, to help raise output.

It aims to produce 99,000 metric tons of nickel a year by 2012.

“The ability of the Activox Project to raise this significant amount of debt at extremely attractive terms clearly reflects the confidence and robustness of the project as we now enter the next phase of the commercialisation of the Activox technology,” said Colin Steyn, president and chief executive of LionOre.

RMB is the investment banking arm of FirstRand Bank Limited, one of South Africa’s largest financial services groups, which has had a long relationship with LionOre and Tati Nickel, having funded the construction of the Tati concentrator in 2002 and the Activox demonstration plant in 2004.

To guarantee future operating cash flows and the resulting LionOre funding contribution of $370 million, RMB has required Tati Nickel to enter into limited hedging arrangements comprising approximately 35 percent of its nickel production over a two year period, 50 percent of its copper production over a two year period and a lesser proportion of its anticipated copper production in subsequent years.