Business

Moly miners secure German contract

AVANTI has signed a deal to sell half of the production from its planned Kitsault molybdenum mine north of here.

The deal with steelmaker ThyssenKrupp Metallurgical Products GMBH (TKMetPro) of Germany could be worth a potential (US) $2.7 billion over the projected 16-year life of the mine, the company said in a June 20 news release.

Called an offtake agreement, the deal also paves the way for two German lenders to lend Avanti $300 million and have 95 per cent of that amount guaranteed by the German government, says Avanti president Craig Nelsen.

"The unrelated party offtake agreement with TKMetPro ... will result in the importation and use of our product in Germany which is a benefit to the German government," said Nelsen.

"Based upon this import contract, we qualify for a debt guarantee program supported by the government. This provides our lenders with assurance that their debt is protected. The offtake agreement also provides our lenders with assurance that the product will be sold."

Molybdenum is prized by steelmakers for its strengthening properties.

Nelsen said the $300 million in German loans represents half of the $600 million debt Avanti wants to take on to finance its $1 billion project.

It then expects to raise a portion of the remaining $400 million by selling a part interest in the mine to what Nelsen calls an Asian strategic partner.

"Avanti will commit the proceeds of this sale to its share of equity. The partners will then have the obligation to each provide cash in the pro rata ownership for any remaining equity and Avanti would go to the capital markets to help raise that share," he said.

This spring Avanti received provincial environmental approval for its project, provided it meets more than 30 conditions, and is now working on permitting with provincial officials.

Federal approval is also required and Nelsen expects a final report to be released for public comment in mid-July.

To date, Avanti has spent approximately $70 million advancing its project which, if all goes according to plan, could open as early as 2016 with upwards of 300 employees.

The Kitsault area has already been the location for two earlier molybdenum mining operations with the second closing down because of market conditions shortly after it opened in the early 1980s.

That closure resulted in the virtual abandonment of a purpose-built town at Kitsault.

Avanti, however, will be building a camp for its workers.

Although the project has received approval from the province and the company is waiting for a federal response to its plans, the Nisga'a Lisims Government is opposing the project.

Kitsault is not part of the core Nisga'a lands as outlined in a land claims treaty but the Nisga'a do have an influence through treaty provisions on development there.

The Nisga'a say elements of the project put the surrounding environment at risk.

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