European Nickel (LON:ENK), the AIM listed mining group behind the development of the Çalda? nickel project in Turkey, has agreed a partnership deal with Hunter Dickinson, which will see the Canadian mineral developer make a US$50m equity investment in the flagship project. European Nickel is currently in the process of raising western bank project financing for Çalda?. It has an indicative term sheet for US$300m of debt together with an additional US$25m cost overrun facility out of a total project development cost of US$428m, which includes project capital expenditure, working capital, financing costs and escalation. Equity of US$78m has already been spent on the project. The company said the equity investment would considerably strengthen the project finance process. Shares in the company responded with a rise of more than 29% to 22p.
As part of the two-tranche deal, Hunter Dickinson will initially inject £3.36m in a share placing priced at 36p per share. The second tranche is contingent on European Nickel securing the project finance facility and will see the company inject £36.7m for shares priced at 44p each. Ahead of the second tranche, European Nickel will seek to raise up to a further US$20m through a private placement to existing institutional shareholders. On completion of all of the placements, Hunter Dickinson, through its affiliate Constantia, will hold a stake of just under 30% in the company.
Simon Purkiss, the executive deputy chairman of European Nickel, said: “I am delighted to welcome Hunter Dickinson as a strategic partner and new shareholder. HDI has an exceptional track record in advancing mining projects through development and construction and on to operations. Their expertise will complement European Nickel's management team and technological know-how to assist the successfully delivery of the Çalda? project.”
He continued: “The Çalda? project is our flagship asset, offering near-term nickel production and will be one of the largest foreign direct investments in Turkey's mining industry. With proven JORC reserves of 33.2m tonnes at 1.13% Ni, the mine is targeting 20,000tpa of nickel production over a 14 year life of mine. Using our low cost, environmentally friendly, heap leach technology, we anticipate a net cash operating cost of US$3.59 per pound of nickel and project capital expenditure of US$277m, which equates to a capital cost per annual pound of nickel of US$6.12. The project's NPV is US$490m, at a 10% discount…
This is a genuinely transformational deal. The market does not get it at all.
I am surprised but very pleased.
