Moly Mines officially secures $500m Chinese loan

Moly Mines (TSE:MOL)(ASX:MOL) said Tuesday that it has signed a project financing agreement with China Development Bank Corp (CDB), totaling US$494 million, to construct the Spinifex Ridge molybdenum-copper mine in Western Australia.
At the start of May, Moly announced the confirmation that the CDB completed its credit approval process for the revised US$494 million in project finance facilities.
The commitment consists of a US$454 million 12-year syndicated senior loan, and a US$40 million working capital facility.
Moly said that Hanlong Mining Investment, its major shareholder, will also provide a US$6 million junior subordinated loan to fulfill its US$500 million commitment.
"We are extremely proud to have completed these arrangements with CDB which are the culmination of outstanding but difficult work from the Moly Mines and Hanlong teams," said Moly Mines CEO and managing director, Dr Derek Fisher.
"Our partnership with CDB and Hanlong provides a major piece of non-dilutionary capital on terms that are unachievable and unavailable from western banks."
The company said there are a number of conditions that must be met before it draws down the syndicated facility, including verification that the mine is fully funded to positive cash flow.
In January, the company said that the appreciation in the Australian dollar against the US dollar was impacting the Spinifex project's financial model, lowering forecast returns.
Total capital and owners costs are now estimated at US$720 million, excluding working capital and debt service during construction. Construction of the mine and processing facilities will take approximately 24 months, once drawdown of the funds is available.
The company said the funds secured today will go a long way to financing the project, adding to existing cash on hand and future net iron ore revenues; however, additional money will also be required to fully fund the project.
Currently, discussions on how to secure these further funds are underway, with a final decision on the construction of the mine following shortly after.
Last month in a market update, Moly welcomed funds associated with EIG Global Energy Partners to the company's share register, after EIG exercised 19 million warrants.
The warrant holdings were from the US$150 million interim Financing facility entered into in September 2008, with another 4.9 million warrants still outstanding.
The share issue coincided with Moly shareholders re-appointing EIG’s nominee, Andy Zhmurovsky, to the board.
In addition to the molybdenum-copper deposits at Spinifex Ridge, the project also hosts a number of iron ore deposits, and in early March, the company secured export for iron ore to September 2015, with access to the Utah Point facility at Port Hedland.
In light of the molybdenum price volatility, the iron ore export agreement secures cash flows over the medium term for the project, and supplies funding for ongoing exploration and development.
Moly also made a US$10.3m shipment of Spinifex Ridge iron ore fines destined for China at the end of February. It expects the Spinifex Ridge mine production rate to reach 1 million tonnes per annum early in the second quarter.