Mirabela Nickel, Brazil-focused base metals explorer listed on the Australian Stock Exchange, has drawn down in full the US$50mn subordinated loan it secured from Norilsk Nickel Harjavalta Oy, the Finnish arm of Russia’s Norilsk Nickel.
This loan was extended to the company as part of a five-year nickel concentrate off-take agreement with Norilsk, and it will be used to fund its ongoing construction of its Santa Rita nickel sulphide project in Brazil.
Under the terms of the off-take agreement, Norilsk Nickel will purchase 50% of the nickel concentrate produced at Santa Rita until the end of 2014. The nickel concentrate will be shipped to Norilsk’s Harjavalta smelter in Finland. The agreement also gives Norilsk the option to convert its subordinated loan to loans in Mirabela at the price of US$8 per share, for up to a maximum of 5mn shares (US$40mn). Norilsk Nickel Harjavalta Oy became part of the Russian company following its purchase of OM Group’s nickel business from March 1, 2007. It is the only nickel refinery in Finland.
Commenting on the off-take agreement, managing director at Mirabela, Nick Poll, says: “We are delighted to have secured Norilsk, the largest nickel producer in the world, as an off-take partner for 50% of our nickel sulphide concentrates. The agreement with Norilsk meets our expectations on net payments for nickel and various credits”
Mirabela has also signed a separate five-year off-take agreement with Votorantim of Brazil for 50% of nickel concentrate produced, therefore managing to secure offtake agreements for 100% of its nickel concentrate produced by the Santa Rita project.
Between the two offtake agreements, Mirabela has secured US$100mn in subordinated debt. This type of financing is an important part of the company’s overall project financing strategy, as it doesn’t carry the hedging requirements of the senior debt or the dilution of straight equity.
Production at Santa Rita is due to start in mid-2009 at a capacity of 18,500tonnes per year of nickel in concentrate. Construction of the project is said to be on schedule, with 60% completed to date. The project continues against a backdrop of globally falling base metals prices.
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