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  • MZI Resources Snares US$41.5M From RCF For Keysbrook Mineral Sands 0 comments
    Oct 2, 2013 1:38 AM

    MZI Resources (ASX: MZI) has secured a pivotal US$41.5 million (A$44.2 million) equity funding package from highly regarded resources private equity fund Resource Capital Fund (RCF) for its Keysbrook mineral sands project in Western Australia.

    Importantly, it paves the way for MZI to complete the debt funding agreement with two Joint Lead Arranger (JLA) banks.

    It will also allow construction to begin late this year with first production currently scheduled for the December 2014 quarter.

    "The funding package is the outcome of extensive due diligence conducted by RCF since it became a cornerstone investor in MZI. RCF's support is a testament to the attractiveness of the project," chief executive officer Trevor Matthews said.

    "This package provides the equity/mezzanine funding and when combined with the debt funding currently being finalised with the JLA banks, is expected to provide all the funds required to develop the Keysbrook Project.

    "This package gives us confidence that the project financing process will be completed shortly which, following completion of certain financing conditions, will enable us to commence development activities at Keysbrook."

    MZI will now move towards finalising conditions precedent to the RCF funding package, including preparing the necessary documentation for shareholders to approve the funding package.

    The RCF funding package is in addition to the $3 million placement to RCF completed in July 2013 that gave the fund a cornerstone 12% shareholding in MZI.

    RCF is currently investing its sixth fund, Resource Capital Fund VI L.P., with committed capital of $2.04 billion and currently manages about US$1 billion of assets (as of 30 June 2013) through its three other active private equity funds, Resource Capital Fund V L.P., Resource Capital Fund IV L.P. and Resource Capital Fund III L.P.

    RCF Funding Package

    The RCF funding package consists of the following:


    - US$3.5 million payable by RCF in consideration for a 2% gross revenue royalty from all minerals produced from the Keysbrook Project and the surrounding area; and
    - The royalty consideration will flow contemporaneously with the Convertible Loan Facility funding.

    Convertible Loan Facility

    - US$21 million Convertible Loan Facility provided by RCF to be used to fund development costs associated with the Keysbrook Project;
    - Maturity date to be 54 months from the date of drawdown. MZI cannot pre-pay this facility; and
    - Interest is payable at 10% per annum and MZI can elect to pay this interest using MZI shares.

    Bridge Finance Facility
    - Tranche A with a facility limit of US$7 million to be used to provide funding for any debt service reserve required to be established under the JLA debt funding agreement; and
    - Tranche B with a facility limit of US$10 million to be used for funding MZI corporate purposes as agreed with RCF and to provide funding support for the balance of Keysbrook Project development costs;
    - Both tranches have a maturity date that is 12 months from the date of first draw. MZI can prepay the whole or any part of this facility without penalty; and
    - Interest is payable at 10% per annum and MZI can elect to pay this interest using MZI shares.

    The conversion price for the Convertible Loan Facility will consist of A$0.01 and the higher of 120% of the lower of:
    - A$0.01373;
    - The 30 trading day VWAP as at the Acceptance Date; and
    - The 30 trading day VWAP as at the date of drawdown of the Convertible Loan Facility

    In the event the Bridge Finance Facility tranches are not repaid by the maturity date, they will automatically convert to a convertible loan facility on the same terms as the Convertible Loan Facility though with a lower 110% conversion.

    Keysbrook Mineral Sands Project

    The Keysbrook Project promises to transform MZI into a substantial mineral sands producer with strong cashflow and a pipeline of growth projects.

    The Keysbrook Project will produce an average 91,000 tonnes per annum of mineral sands products from 110,000 tonnes of dry heavy mineral concentrate. This comprises:

    - 26,000 tonnes per annum (dry) of leucoxene 70% titanium dioxide;
    - 36,200 tpa (dry) of leucoxene 88% titanium dioxide (L88); and
    - 28,700 tpa (dry) of zircon concentrate.

    Heavy mineral concentrate will be trucked about 120 kilometres to Doral's mineral separation plant, which is just 10 kilometres from the Bunbury Port, for toll treatment.

    Keysbrook has total development costs of A$64.3 million and is expected to have LOM average operating costs of A$34.1 million per annum, or A$379 per tonne of product.

    It has total Proved and Probable Ore Reserves of 26 million tonnes grading 2.6% for in situ total heavy minerals of 670,000 tonnes. This is sufficient for a mine life of 5.5 years.

    Potential exists to extend mine life to more than 15 years.

    MZI has been progressing development of the Keysbrook project in recent months.

    It had in mid-June executed the key Port Services Agreement with the Bunbury Port Authority in Western Australia that provides sufficient capacity to export all products that will be produced from its Keysbrook mineral sands project.

    It had in April signed a crucial sales agreement with DuPont Titanium Technologies that covered all of the leucoxene 70% titanium dioxide production and had also reached a mineral sands toll treatment deal with Doral.


    That the deal from RCF is share price and value accretive is axiomatic, providing a pathway to market that will provide significant encouragement to project funders. We expect, given the metrics of Keysbrook, this will be forthcoming in due course.

    MZI will trade higher today on the news.

    Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX "Small and Mid-cap" stocks with distribution in Australia, UK, North America and Hong Kong / China.

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