REG-Pensana Plc: Update on Longonjo Financing and Development

PensanaAnnouncement

27/06/2023 16:45

 

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

 

Pensana Plc

 

("Pensana" or the "Company")

 

Update on Longonjo Financing and Development

 

 

Pensana Plc (LSE: PRE) is pleased to provide details of a revised financing
and development strategy which will see the Longonjo operation fully funded
into production.

 
* A revised execution plan allows for staged mine development which will
reduce the upfront Capex to US$200 million with US$105 million deferred until
year three.
 
* Major shareholder FSDEA to provide an immediate US$15 million loan facility
as part of a broader US$80 million investment (subject to due diligence and
the finalisation of investment terms) to facilitate the development of the
mine and to provide the equity component for the proposed project debt
facility.
 
* ABSA Bank has been mandated to arrange a US$120 million project debt
facility which together with the US$80 million funding will fund the mine and
processing facilities into production.
 
* The mine will employ around 650 people during construction and will create
420 permanent high value jobs.
 
* At full production, once the staged development is complete, Longonjo will
target production of 38,000 tonnes per annum of mixed rare earth sulphate,
containing 14,000 tonnes of TREO and 4,400 tonnes of NdPr oxide, representing
around 5% of world production, for downstream processing or sold on the
international market.
 
* Adamas Intelligence forecasts that due to demand from the electric vehicle
and wind power sectors the value of NdPr oxide consumed will increase
eleven-fold by 2035. Prices are forecast to rise from current levels of
US$67,000 per tonne to US$100,000 per tonne by 2025, increasing steadily to
over US$200,000 per tonne by 2035.
 

 

 

 

Following discussions with its major shareholders, FSDEA (Angola Sovereign
Wealth Fund) and M&G, supported by Angola's Ministry of Mineral Resources,
Petroleum & Gas (MIREMPET), a detailed review was undertaken by the Longonjo
engineering team to reflect the strong desire of all parties to bring the
Longonjo operation into production as soon as practical.

The revised execution plan is based on a staged development of the mine and
processing facilities with a reduced upfront capital cost of US$200 million,
with circa US$105 million, related largely to the national power grid
connection, rail spur and subsequent expansion costs, deferred until year
three following commissioning.

Subsequent to the engineering redesign the Angolan Government has announced a
US$83.6 million funding for the extension of the hydroelectric power line to
Huambo. This has the potential to reduce the capital funding requirement for
the project by US$36 million thereby potentially reducing the capex in year
three to around US$70 million.

FSDEA has agreed to provide an initial US$15 million loan facility as part of
a US$80 million investment (which is subject to due diligence and the
finalisation of investment terms) and which will be repaid out of the larger
facility, for the US$200 million staged development.

The purpose of the proposed investment is to facilitate the immediate
development of the Longonjo mine and to provide the necessary support for the
proposed project debt facility.

The Company has also mandated ABSA Bank to arrange a US$120 million project
loan which together with the potential US$80 million investment represents the
funding required to develop the mine and processing facilities.

The funds are required to be put in place between now and the end of the
calendar year in order to meet the proposed construction and commissioning
schedule with first production targeted in 2025.

FSDEA's commitment towards funding has allowed for the continuation of onsite
activities for which the earthworks contractor (Grupo Nov) and Electrical
contractor (Elektra) have already been mobilised.

During peak construction activity the site will employ over 650 personnel and
contractors and will create over 420 full time jobs.

Wood MacKenzie, CRU and Adamas Intelligence have all forecast strong demand
for NdPr oxide over the next twenty years. Adamas forecasts that due to demand
from electric vehicles and wind power sectors the market for NdPr oxide will
increase five-fold by 2040 leading to an undersupply of 90,000 tonnes per
annum.

NdPr oxide consumption by value is expected to increase by 11-fold by 2035.
Prices are forecast to increase at CAGR of 3.3% to 5.2% over the same period
rising from current levels of US$67,000 per tonne to US$100,000 per tonne by
2025 and increasing steadily to over US$200,000 per tonne by 2035.

 

 

 

Pensana Chairman, Paul Atherley commented:

 

"We are delighted with the ongoing support from the Government of Angola,
FSDEA, ABSA and others for the development of this important project. Longonjo
is one of the world's largest undeveloped rare earth projects which benefits
from a high-grade near surface orebody, with low-cost hydroelectricity and
direct access to the Lobito Corridor rail and port infrastructure.

 

The engineering review and the staged development has resulted in a
significantly lower up front capital cost which greatly enhances the projects'
ability to be financed.

 

This immediate funding from FSDEA will allow CEO Tim George and the team to
accelerate the work on the ground with a view to commencing main construction
later in the year with a view to achieving first production in 2025."

 

 

About Longonjo

Longonjo hosts one of the world's largest undeveloped rare earth deposits with
an initial 20-year mine life and with considerable exploration potential to
extend the resource base both immediately below the existing orebody as well
as at the recent discovery on the Coola exploration licence.

Longonjo Proved and Probable Ore Reserve September 2022 reported using a 0.3%
NdPrO (approx.) cut-off

 

 Classification  NdPrO cut-off (%)  Tonnes (Mdt)  NdPrO (%)  TREO (%)  NdPrO (t)  TREO (t)  
 Proved          0.3-0.4            13.3          0.67       3.19      89,300     424,000   
 Probable        0.3-0.4            16.8          0.46       2.05      77,000     323,000   
 Total           0.3-0.4            30.1          0.55       2.55      166,000    767,000   

Notes:
* Million tonnes are dry and rounded to one decimal place. Grades are rounded
to three significant figures.
* No fixed cut-off is applied to the rare earths NdPrO, the cut-off varies
between 0.3% NdPrO and 0.4% NdPrO.
*        The variable NdPrO cut-off reflects the block cash flow
positive method used to determine the economically viable portion of the
resource.
* NdPrO tonnes and grade is inclusive of the TREO and not additional to it.
 

 

The near surface, deeply weathered orebody, has an average depth of less than
30 metres, with an average mine grade of 3.73% TREO and 0.79% NdPr over the
first five years.

 

The process routes and key equipment required for beneficiation of the mined
material at Longonjo are those commonly used in the broader minerals
processing industry.

Following comminution and flotation, the rare earth mineral concentrate is
subjected to acid roast, leaching and selective precipitation to produce a
mixed rare earth double sulphate (MREDS) or mixed rare earth carbonate (MREC)
providing customers with a clean, radionuclide-free product available for
export via the recently refurbished Port of Lobito.

 

The Longonjo operation is located close to major existing infrastructure in
the form of the recently upgraded Benguela railway line, linking the project
to the Atlantic Port of Lobito, (the Lobito Corridor) and hydro-power
infrastructure.

 

The US International Development Finance Corporation is currently performing
due diligence for a potential US$250 million investment to finance the Lobito
Atlantic Railway Corridor to connect the DRC Copperbelt with the Port of
Lobito. The Lobito Corridor is anticipated to become one of most important
rail transport infrastructure systems within the South African Development
Community (SADC) region over the next 25 years.

 

This follows the award of a US$450 million contract by the Angolan Ministry of
Transport to a consortium of Trafigura, Mota-Engil and Vecturis to operate and
maintain the Benguela railway through to the DRC Copperbelt on a private
concession basis, as part of the Lobito Corridor development.

 

This is expected to have a positive impact on the transport logistics during
the construction period and for reagent and product transport during
operations.

 

At full production, after completing the phased development, the mine will
target production of up to 38,000 tonnes per year of MREDS or mixed rare earth
carbonate (MREC) containing 14,000 tonnes of TREO and up to 4,400 tonnes of
NdPr oxide, equating to around 5% of the global annual production of NdPr
oxides for downstream processing or sold on the international market.

The Longonjo Ore Reserve estimate was prepared by Snowden Optiro in August
2022 as part of the Longonjo Project Feasibility Study, using the guidelines
of the Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves (JORC Code, 2012 Edition).

 

The Competent Person's statement for Longonjo Ore Reserves was released on 23
September 2022 and is available on the Company's website 
www.pensana.co.uk/company-reports

 

About Angola

 

The Angolan government has implemented a modern mining code with an attractive
fiscal regime and a range of investment incentives including tax exemptions
and customs duty exemptions.

 

Over the past decade it has also made significant investments in
business-critical infrastructure such as railways, ports, bridges, and roads.

 

Angola's economic profile has improved significantly over recent years, with
the country's public debt falling from 131% of gross domestic product in 2020
to 66% in 2022. The IMF has projected that the economy will grow by 3.5% in
2023.

 

Angola's annual inflation rate slowed further to a seven year low of 10.8% in
Q1 2023 and marks the 14th consecutive decline in headline inflation, amid a
stable currency.

 

Following an upgrade by Moody's in late 2021, all three major rating agencies
raised their credit assessment of the country's sovereign debt in 2022, with
Fitch and Moody's upgrading the country outlook from neutral to stable in the
second half of the year.

 

The information contained within this announcement is considered by the
Company to constitute inside information as stipulated under the Market Abuse
Regulations (EU) No.596/2014. Upon the publication of this announcement via a
Regulatory Information Service, this inside information will be considered to
be in the public domain. The person responsible for arranging for the release
of this announcement on behalf of the Company is Paul Atherley, Chairman.

 

- ENDS -

 

 

For further information, please contact:

 

Shareholder/analyst enquiries:

Pensana Plc 

Paul Atherley, Chairman IR@pensana.co.uk 

Tim George, Chief Executive Officer

Rob Kaplan, Chief Financial Officer

 

 

 

 

 



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