Moly Mines signs landmark financing deal of US$494 million for the construction of Spinifex Ridge

Moly Mines (ASX: MOL, TSX: MOL) can now move towards unlocking the cash flow potential of the Spinifex Ridge Molybdenum / Copper mine in the Pilbara, with the landmark US$494m financing deal for construction of the project.

The facilities consist of a US$454 million syndicated facility agreement (SFA) and a US$40 million working capital facility with China Development Bank Corporation (CDB).
Hanlong Mining Investment Pty Ltd (Hanlong) will also provide a US$6 million junior subordinated loan on terms consistent with the SFA over the coming months to fulfil Hanlong’s US$500 million commitment to Moly.

Derek Fisher, managing director for Moly, said "Our partnership with CDB and Hanlong provides a major piece of non-dilutionary capital on terms that are unachievable and unavailable from western banks."

There are a number of conditions which need to be met before Moly can draw down on the funds under the SFA, including verification that the mine is fully funded through to positive cashflow.
Moly disclosed in January 2011 that the appreciation in the Australian dollar against the US dollar was impacting on the project financial model and had lowered forecast returns.

Total capital and owners costs, based on the engineering, procurement and construction (EPC) contract awarded in May 2011, are estimated at US$720 million, excluding working capital and debt service during construction.

Moly said the total financing facilities of US$500 million, existing cash on hand and forecast net iron ore revenues will contribute to the total funding required however, there will be additional funds required to ensure the project is fully funded.

Moly and Hanlong are in discussions on how additional funds may be secured and a final investment decision leading to construction at Spinifex Ridge awaits the outcome of these discussions.
Steven Xiao, managing director of Hanlong, commented on his support for the project saying, “We’re extremely pleased that 12 months of continuous effort with the Moly Mines team has culminated in the execution of the finance facilities with CDB.

"Hanlong will continue its support for Moly Mines and the team led by Derek Fisher as we jointly pursue a number of growth opportunities."

SFA Key Commercial Terms

- The SFA is a senior secured 12 year finance facility with a two year availability period for drawdown, due for repayment in full by 30 June 2023, with interest charged at 3.8% over the six month US$ LIBOR rate (currently 0.39%).
- The facility will expire if conditions precedent to drawdown are not satisfied or waived by 13 May 2012, with a commitment fee of 1% per annum on undrawn amounts, commencing upon first utilisation.

The security package required by CDB includes

- Fixed and floating charges granted by Moly and its subsidiaries over its respective assets.
- A mortgage to be provided by Hanlong over its shares in Moly.
- Project and corporate guarantees provided by Moly and its subsidiaries and to be provided by Sichuan Hanlong Group Co Ltd and certain of its subsidiaries.
- Project completion undertakings and capital cost overrun support to be provided by Sichuan Hanlong Group Co Ltd.
- Personal guarantees to be provided by Mr Liu Han.


Originally published at: http://www.proactiveinvestors.com.au/companies/news/17479/moly-mines-signs-landmark-financing-deal-of-us494-million-for-the-construction-of-spinifex-ridge-17479.html