4th Dec 2006 09:08
Albidon Limited04 December 2006 Level 1 62 Colin St West Perth 6005ALBIDON LIMITED Western Australia ARBN 107 288 755 Tel:+61 8 9211 4600 Fax:+61 8 9211 4699 Email:[email protected] ASX Code: ALB AIM Code: ALD OFFTAKE AGREEMENT SIGNED WITH JINCHUAN GROUP FOR MUNALI NICKEL PROJECT - A MAJORMILESTONE IN PROJECT DEVELOPMENT HIGHLIGHTS • Offtake Agreement signed with Jinchuan Group Limited ('Jinchuan') for the purchase of nickel concentrates from Munali over the life of the project. • Agreement reached on the terms of an offtake financing package comprising: Jinchuan to provide US$20 million of subordinated debt finance to fund thedevelopment of the Munali Nickel Project; and Jinchuan to make an equity investment of US$5 million in Albidon. • Albidon and Jinchuan have agreed to cooperate in evaluating a number of proposals to optimize the implementation of the Munali Project. • Agreement was reached with Jinchuan on highly competitive terms, following extensive negotiations with a number of large nickel companies. • Completion of the Offtake Agreement represents a major milestone in the growth of the Company as it underpins the ongoing development of Munali. • Albidon's agreement with Jinchuan establishes a relationship with the largest nickel group in the rapidly expanding Chinese market. Munali Nickel Project The Munali Project (100% Albidon) is located approximately 60 kilometres southof Zambia's capital city Lusaka. The Munali project area comprises theEnterprise Deposit and a number of other nickel prospects in the MunaliIntrusion, the most advanced of which is the Voyager prospect along strike tothe north of Enterprise. A positive Bankable Feasibility Study was completed in July of this year andsite works commenced in September, following receipt of all required approvals.A capital raising was completed in October to provide US$35 million of equityfinance for the project funding. Debt financing discussions are ongoing with anumber of banks and are expected to be concluded in the near future. Offtake negotiations have been undertaken in parallel with the above activities,and these have now been successfully concluded with the signing of the agreementwith Jinchuan. Offtake Agreement and Offtake Financing The offtake arrangements agreed between Albidon and Jinchuan comprise severalagreements, as follows. A facilitation agreement has been signed that provides a framework for theexecution of a suite of documents, each of which is conditional on the others,in relation to: • the purchase by Jinchuan of all nickel concentrate derived from the Munali Project and any expansions of it; • a subordinated project financing facility under which Jinchuan will provide funds totalling US$20 million for development of the Munali Project; and • the subscription by Jinchuan for shares in Albidon with a total value of US$5 million. The Offtake Agreement has been signed, and agreement has also been reachedbetween Albidon and Jinchuan on the substantive terms of the subordinatedfinancing and the placement of shares. The Offtake Agreement was signed following a protracted process of negotiationwith a number of major nickel companies. These discussions were ongoingthroughout the course of 2006, and the final outcome is a set of highlyattractive terms for the sale of Munali nickel concentrate containing commercialquantities of copper, cobalt, platinum and palladium. The in-principle terms agreed for the subordinated debt are attractive and forman important part of the Company's strategy to develop a funding package basedon an optimal mix of bank debt, subordinated debt from the offtake partner, andequity financing. The pricing proposed for the share placement is the volume-weighted averageprice of Albidon shares trading on ASX in the 45 calendar days before the date of signing of the Offtake Agreement. The subordinated loan and placement are subject to the finalisation of formalagreements which the Company and Jinchuan are currently completing in accordancewith the facilitation agreement. Jinchuan Group Limited Jinchuan is China's largest producer of nickel, cobalt and platinum group metalsand is a major producer of copper. The Jinchuan Group's current nickelproduction is approximately 100,000 tonnes per annum, with a target to reach150,000tpa by the year 2010. The purchase of high quality concentrates such asthose from Munali is a key part of Jinchuan's strategy to meet this goal. Jinchuan has a long-standing commitment to technological innovation in theconcentration, smelting and refining of nickel, cobalt and platinum group metalproducts. Albidon and Jinchuan intend to work together on the design andconstruction of the Munali concentrator to optimise the grade-recoveryperformance for all metals to the benefit of both companies. Albidon is pleased to welcome Jinchuan Group as a partner and shareholder, andthe Company looks forward to examining possibilities for collaboration withJinchuan on other metal projects in Africa. Forward Programme for Munali Following completion of the Bankable Feasibility Study, the recent US$35 millioninstitutional share placement,and finalisation of the Offtake Agreement, theimplementation of the Munali Project will be accelerated, with a focus on thefollowing key areas of activity: • Appointment of senior lenders to provide bank debt finance for the project. • Site preparation including mobilisation of the mining fleet, excavation of the boxcut for the decline, and construction of access roads. • Placing orders for major items of equipment that have long lead times for delivery. • Drilling of additional water bores to provide construction water in addition to assisting in dewatering the near-surface portions of the mine. If you have any queries please contact the Company Secretary, Nicholas Day orManaging Director, Dale Rogers on +61 8 9211 4600 or email [email protected]. Additional information may also be viewed on Albidon's website atwww.albidon.com This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
ALD.L