European Nickel PLC (AIM, PLUS: ENK) said Endeavour Financial Corp has agreed to increase the US$4 million bridge loan facility currently in place by US$1 million and to extend its maturity date to March 1 2010.
The laterite nickel specialist European flagged on December 1 that Endeavour had agreed to negotiate rescheduling of the US$4 million bridge loan facility after agreeing to extend it until 30 November a month ago as the company finalized its long term funding requirements for the Caldag nickel project in Turkey.
The company said today it has agreed to a 2 percent per month extension fee, payable on maturity in respect of the original facility amount. In connection with the facility amendment and in addition to the existing warrants as pet the announcement on July 8 2009, Endeavour has also been granted 6.5 million additional warrants, 4 million warrants at a price of 8 pence and 2.5 million warrants at 9 pence, all of which are exercisable over a period of three years. The coupon on the facility is 10 percent per annum.
In addition Endeavour has been appointed to provide financial advisory services to the company and in connection with this, the company has granted Endeavour 6 million warrants at 9 pence, exercisable for a period of three years.
Following the formal approval by the board of Jiangxi Rare Earth and Rare Metals Tungsten Group Co Ltd (JXTC) in late July, JXTC has been advancing the Jiangxi Provincial government's approval process for the US$20 million overseas investment in the Caldag project through the various government departments. JXTC has advised European Nickel that provincial government approval of the JXTC investment is also subject to the receipt of an export credit agency letter of intent. This process is now expected to be completed during the first quarter of 2010.
On the project debt financing side, following China Tianchen Engineering Corporation's (TCC) application for credit guarantee insurance of up to US$350 million to the government backed export credit agency providing the cover for the debt facility, a letter of interest has been received which confirms the process is now fully underway.
An expression of interest has also been received from an institution managing the investment of a US$43 billion government backed programme, which is a further step in the credit guarantee insurance process. The next step is to receive a formal letter of intent, which is now expected during the first quarter of 2010.
Endeavour is acting as financial adviser to the company on the Chinese debt financing.
European Nickel managing director Simon Purkiss said: "Endeavour's ongoing support while we make progress on the Chinese financing is appreciated. The Caldag project is ready to start construction and the inherent value of our low cost heap leach technology is recognised by Endeavour."
Endeavour CEO Neil Woodyer was cited as saying: "We believe in European Nickel's business and will continue to support European Nickel in all areas of its strategic development."
In July, the company won a deal from BHP Billiton PLC (ASX: BHP; LSE: BLT) releasing it from its obligations under the Caldag off-take agreement announced in June 2006. Originally, only 50 percent of Caldag's off-take was going to be sold to JXTC but this has been increased to 100 percent by mutual agreement to facilitate the 100 percent debt financing of the project from China.
European Nickel will pay BHP Billiton US$10 million on first drawdown of the project finance facility and a further 24 monthly payments of US$1 million, starting once nickel output has reached 50 percent of the Caldag plant's design specification of 20,400 tonnes per annum of contained nickel.
Caldag contains a JORC proven reserve of 33.2 million tonnes at 1.13 nickel, for a nickel content of 375,000 tonnes. Here European Nickel have developed and demonstrated a new process for the extraction of nickel and cobalt from European “dry” laterite ores: heap leaching, to produce a mixed hydroxide product (MHP) for further refining into its component metals.
A bankable feasibility study was concluded in 2006, based on an operation producing 20,400 tonnes of nickel in concentrate per annum and 1,200 tonnes of cobalt. Recent estimates calculate a total capital expenditure of US$428 million with operating costs of US$1.99 per pound.