Pacific Nickel is all set to start development of its Kolosori nickel project after securing the US$22m Glencore loan facility. Pic via Getty Images.
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Pacific Nickel has received a huge vote of confidence from Glencore International, which committed to finance pre-production requirements for its Kolosori nickel project.
Glencore’s Letter of Commitment confirms receipt of its internal management approvals to execute a loan facility agreement of up to US$22m (A$32.6m) as well as an amended offtake sales agreement.
Importantly for Pacific Nickel Mines (ASX:PNM), the funds are expected to be sufficient to meet pre-production funding requirements for the Kolosori project in the Solomon Islands.
“Glencore’s Letter of Commitment to provide an up to US$22m senior secured debt facility for the Kolosori Nickel Project is an important milestone for the development of the Project,” chief executive officer Geoff Hiller said.
“The company has worked closely with Glencore since first announcing the granting of a mandate to Glencore in June 2022.
“The company anticipates that it will be in a position to effect an initial draw down of US$3m once documentation has been completed. This will enable the company to continue the current development works.
“The company believes that the project holds relatively low technical risk, and that capital payback will be achieved in under 12 months.”
The project loan facility has a three-year repayment term which begins from the first shipment and with no scheduled repayments due during the wet season months.
It offers a competitive margin above the US Secured Overnight Financing Rate and has no mandatory hedging.
Meanwhile, the six-year offtake agreement is a take or pay contract with a price linked to agreed 1.5% DSO nickel benchmarks and adjusted for nickel and moisture bonus/penalty payments.
This covers 100% of mine production during the term while offering FOB Kolosori delivery basis with 85% payment upon provisional invoicing.
Kolosori currently has an Ore Reserve of 3.7Mt grading 1.6% nickel and a Mineral Resource Estimate of 9.21Mt at 1.46% Ni for 134,000t of nickel at a 1% cut off.
It is the subject of a Definitive Feasibility Study with highly attractive post-tax net present value and internal rate of return, both measures of a project’s profitability, of US$64m and 156% respectively in the base case scenario which is based primarily on the ore reserve (97%) with a small portion of the inferred resource.
Pre-production Capex is just US$18.6m with payback in just 12 months thanks to direct shipping ore, which requires minimal processing.
The project is expected to produce up to 1.5 million wet metric tonnes of DSO material each year.
Pacific Nickel has advanced Kolosori to the project execution stage and has secured approval for its Export Permit.
This article was developed in collaboration with Pacific Nickel Mines (ASX:PNM), a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
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