Monday, March 30, 2009

Terramin Gets Financing For Algerian Mine

Terramin Australia Ltd said on Monday it had begun financing for a proposed zinc and lead mine in Algeria, securing A$46 million ($32 million) from investors in China and Europe.

Terramin has agreed to a five-year lead and zinc concentrate supply pact with commodities trader Transamine for material from the mine, Talma Hamza, which could potentially yield a quarter of a million tones of metal annually, Terramin Managing Director Kevin Moriarty said.

The miner has also agreed to sell equity to one of China's largest resources firms, China Non-Ferrous Metals Industry, and give it a seat on Terramin's board in exchange for funds.

The sale must be approved by Australia's foreign investment regulators, who are also reviewing a proposed $19.5 billion investment by China Aluminum Co in Rio Tinto Ltd/Plc amid some opposition in Australia to Chinese investment in domestic companies.

On Friday the Australian government blocked the sale of a copper mine to China's Minmetals, citing security concerns given its location near an Australian military installation.

Terramin recently commissioned its Angas mine in Australia, forecast to yield 45,700 tonnes of zinc and 16,500 tonnes of lead concentrate this year.

A final study into the feasibility of the Algerian project will be finished this year, enabling Terramin to seek major funding from smelting firms and additional Chinese investors to underwrite capital costs estimated at under $290 million, Moriarty said.

It was likely to be next year before Terramin seeks most of the funding, hopefully allowing time for metals markets ravaged by the commodities bust to recover, according to Moriarty.

The supply agreement with Transamine covers 100,000 tonnes of zinc and 40,000 tonnes lead concentrates annually, starting once the mine is running in 2011, Moriarty said.

"Both Transamine and NFC are promising to bring in financing via smelters and directly from China," Moriarty said. "The A$46 million buys us time."

Zinc and lead markets have been hit hard by the slump in commodities. Zinc MZN3 is down 44 percent, while lead MPB3 is off 55 percent in the last year.

Transamine will seek to use its offtake rights to access funds from smelting firms to supplement bank finance once development of the mine commences, Moriarty said.

The mine is being designed to initially produce 250,000 tonnes of lead and zinc concentrate containing about 50 percent metal, eventually climbing to 400,000-500,000 tonnes, he said.

Under the terms of the agreement with NFC, Terramin will issue 15.5 million ordinary shares at A$0.65 each to raise A$10.075 million, making the Shanghai-listed firm Terramin's largest shareholder.

Terramin is also entitled to issue $10 million in unlisted, unsecured convertible redeemable notes to Transamine.

Following a decision to mine, Terramin can issue a further $7.5 million of unlisted, unsecured convertible redeemable notes and issue fully paid ordinary shares, Moriarty said.

No comments: