Ironbark Zinc Limited (ASX:IBG) has agreed to a range of initiatives with the Government of Greenland which strengthen the company’s balance sheet during the COVID-19 crisis.
The company has secured a redraw of around A$1.5 million from the $3 million previously contributed to its Greenlandic escrow account which will be available for use at the full discretion of the Ironbark board.
It is a nil interest arrangement and the company has 24 months from the date of the receipt of funds to reinstate the cash, with the option to repay earlier.
Over the period July 2018 to December 2019, IBG transferred around 14 million Danish Kroner (DKK) into a Greenlandic escrow account to cover the potential rehabilitation of the exploration camp at Citronen.
This cash is currently static and IBG has no further site works planned in 2020 due to travel restrictions into Greenland.
The Government of Greenland has agreed to allow IBG to redraw 50% of the escrowed funds, with the key condition of drawdown that the funds are reinstated no more than 24 months later provided that the Citronen exploration camp is still potentially in need of rehabilitation.
Under the prevailing government conditions, if the Citronen project moves into development within the next 24 months, then it is likely that a revised bonding regime will be re-instated.
Deferral of advisor fees
Ironbark typically budgets for approximately A$100-150,000 per year to be paid in fees to the Government of Greenland to cover licensing charges for the Citronen Project, with the fees for 2020 previously forecast to be paid in the current quarter.
The Government of Greenland has agreed to a deferral of all advisor fees for 2020 and the first half of 2021, resulting in an immediate cash flow saving of A$150,000 in the June quarter of 2020.
Payment will instead occur in the third quarter of 2021.
Ironbark's Citronen Project in Greenland
COVID-19 has changed the market landscape substantially, with a dramatic effect on economic conditions and equity market appetite for new growth projects.
The IBG board recognises that the prevailing economic and market uncertainty due to COVID-19 has rendered the pursuit of project finance in 2020 challenging and considers it likely that a return of confidence will be delayed until possibly 2021 at the earliest.
It is therefore not realistic to pursue meaningful debt and equity opportunities to develop the Citronen project until market confidence is restored.
The board believes that the remainder of 2020 should be devoted to removing all outstanding barriers to undertaking a financial investment decision which can be pursued in 2021.
Ironbark believes that temporary relief provided to the Greenlandic resources industry during the COVID-19 crisis reflects the importance that the Government of Greenland places on facilitating future mining investment.
These two concessions will considerably strengthen IBG’s balance sheet, enhancing the company’s cash position by at least A$1.65 million over the June quarter and ensures that work can continue to proceed on the development plan during 2020.
Shares are up more than 28% today to 0.9 cents.
Looking forward, IBG intends to:
- Complete the revision of the Citronen Feasibility Study by the end of 2020 by finalising the current Mining Plus work in the current quarter and committing to further work including updating the processing plant design and layout, construction plan, and other minor elements of the existing feasibility study;
- Completing the acquisition of all outstanding approvals required ahead of development and financing;
- Pursuing a debt funding package to support the development of Citronen; and
- Further investigating equity funding pathways to support the development of Citronen.
The IBG board is confident that all project development activities are now fully funded through to a financial investment decision for Citronen (expected prior to the end of 2021) and that this announcement sets in motion the process to transform IBG into a producer.