European Nickel (LON:ENK), a company that focuses on the identification, acquisition, development and exploitation of nickel laterite deposits, primarily in Turkey and the Balkan Region, gave an update today to shareholders on the two routes of project financing it is currently pursuing for the Çaldag nickel laterite project in Turkey. The company also reported on a recent Turkish tax incentive, which will reportedly enhance the project's robust economics further.
The Financing Framework Agreement with Jiangxi Rare Earth and Rare Metals Tungsten Group Company Limited and China Tianchen Engineering Corporation, which was announced on 19 February 2009, has now been extended, by mutual agreement, for six weeks until 14 May 2010, the report said. This time extension is intended to allow for the Chinese export credit agency to provide a letter of intent and for the Industrial and Commercial Bank of China to prepare a term sheet for the US$350M of project finance required for the construction of the Çaldağ project in Turkey.
There has also been a time extension for the BHP Billiton Offtake Termination Agreement, which was announced on 8 July 2009. This was granted because the Chinese financing process required extra time to complete. JXTC has also notified European Nickel that the Jiangxi Provincial Government's approval for JXTC's purchase of 20% of the Çaldağ project for US$20M is nearing completion, subject to the finalisation of the debt financing.
For the Western banks project financing, the company confirms that term sheets have been presented and are being negotiated with the view of establishing a group of individuals to lead the financing during the second quarter 2010. This reportedly follows expressions of interest in January 2010 from a number of Western banks to provide the project finance. Simon Purkiss, Managing Director of European Nickel, commented on the agreements:
"We have worked hard with our Chinese partners to progress a Chinese finance solution at a time when conventional Western Bank project finance was not available. This extension recognises the relationships we have built in China and their continued willingness to finance the project. However, the financing has taken longer to conclude than anticipated and whilst we have allowed an extension in time, we have kept it relatively short as we now have the strong prospect of an alternative source of project finance from Western banks. The continued interest from our Chinese partners and the Western banks demonstrates the attractiveness of the project and, in conjunction with our advisors Endeavour Financial, we are pleased with the progress that both financing sources are making towards securing term sheets. The Turkish government's granting of significant tax incentives for large scale industrial projects such as ours further enhances project's robust economics."