Tech Metals: Barrick deal opens the floodgates for Tanzania project financing, EcoGraf says
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A landmark deal between major gold miner Barrick and the Tanzanian government could unlock financing for EcoGraf’s unrelated Epanko graphite project.
For three years Tanzania had tussled with Acacia Mining and then $33bn market cap Barrick (after it acquired Acacia last year), ostensibly over a tax dispute.
This culminated in an export ban and changes to the country’s mining laws.
Those changes affected everyone – some more than others.
The deal, signed January 24, gives Tanzania a 16 per cent stake in Barrick’s in-country mines and includes a raft of other social initiatives.
For potential project financiers, it also removes some of the uncertainty around operating in the east African nation.
Ecograf (ASX:EGR) – formerly Kibaran Resources – says this deadlock between Barrick and the government delayed development of the Epanko graphite project for two and a half years.
EcoGraf was working with KfW IPEX-Bank and a second financial institution to raise cash to develop Epanko, but uncertainty around mining legislation and the Barrick settlement led to delays.
In fact, it was only about six weeks away from locking in finance for the project when the Tanzanian government introduced these changes to the mining code.
“In spite of delays resulting from legislative changes and uncertainty regarding the Barrick settlement, the Company is pleased to report that positive progress has been achieved in recent weeks to revise the proposed financing structure with the aim of simplifying and fast-tracking the entire debt financing,” Ecograf says.
“A $US60m senior debt funding proposal is currently being prepared under the revised structure and subject to securing the agreement of all parties, completion of necessary approvals and loan agreements is now expected to be accelerated by the recently announced Government settlement with Barrick.”
Investors agreed, sending the stock – which is down almost 50 per cent over the past 12 months – up almost 26 per cent in morning trade.
The timing is also excellent for fellow Tanzanian graphite play Volt Resources (ASX:VRC), which wants to raise up to $US30 million by issuing senior notes (debt securities that take priority over other types of debt) to build its project.
The ASX listed ~$20 million market cap minnow is using the Stock Exchange of Mauritius, a small island nation in east Africa.
“The Mauritian Stock Exchange offers strong access to a broad pool of investors spanning Mauritius, Europe, the Middle East, North America and Africa, and we look forward to closely working with these investors over the next couple of weeks,” Volt chief exec Trevor Matthews says.
“As we have previously noted, Volt has generated significant interest as the first resources company to undertake a note issuance on the SEM, and we are now focused on advancing this funding process in the near-term.”
Cash will be used to develop Stage 1 of the Bunyu graphite project in and fund resettlement costs for people currently living/farming in the project development area.
The junior explorer moved to Mauritius after Tanzania’s own Capital Markets and Securities Authority (CMSA) set “unrealistic commercial terms” for the bond issue in January 2019.
Volt had been planning to undertake an issue of bonds to investors in East Africa that would be listed on the Dar es Salaam Stock Exchange.
The stock was up 8.3 per cent in morning trade.