After months in the works, Baja Mining said Wednesday that its 70% owned project company, Minera y Metalurgica del Boleo (MMB), has signed US$858 million of financing facilities for the construction and development of the Boleo project in Baja California Sur, Mexico.
The funds comprise of US$823 million of project financing facilities and a US$35 million equity cost overrun support facility.
“The closing of these facilities is a testament to the compelling economics of the project and to the strong effort of our team. It also means full-scale construction activities at Boleo can commence imminently,” said president and CEO John Greenslade.
The Boleo project has a copper/cobalt/zinc/manganese resource consisting of 265 million tonnes of measured and indicated resources (including approximately 85 million tonnes of proven and probable reserves) and approximately 160 million tonnes of inferred resources.
The $823 million in debt facilities, which represents all the debt needed to develop the property, will be provided by a group of lenders led by the Export-Import Bank of the United States providing US$419 million, and includes Export Development Canada, the Korea Development Bank and a group of commercial banks including Barclays Capital, Standard Bank, Standard Chartered Bank, UniCredit Bank and WestLB.
The US$35 million equity cost overrun will be provided by commodity merchant Louis Dreyfus Commodities in the form of a Letter of Credit, which, if drawn, will be converted into common shares of Baja at the an agreed price. The funds will satisfy Baja's equity cost overrun requirement for the project finance package.
Drawdown of the debt is subject to a number of conditions, including the establishment of a hedging program and Baja and its Korean partners paying their required equity contributions.
Another condition of the debt funding is Baja settling its offtake agreement with Louis Dreyfus, under which Louis Dreyfus is committed to purchase on commercial terms, 70% of the annual copper and cobalt production from the Boleo project for the first 10 years of production.
MMB has already finalized the terms of the agreements, it said.
Vancouver-based Baja Mining has a 70% interest in the Boleo copper-cobalt-zinc-manganese project located near Santa Rosalia, Baja California Sur, targeted for copper commissioning in 2012. A Korean syndicate of industrial companies holds the remaining 30% of the project, with Baja being the project operator.
A January 2010 NI 43-101 compliant updated technical report confirmed that Boleo can be developed at an after-tax IRR of 25.6% based on 100% equity. The project, which has a minimum scheduled mine life of 25 years, has an NPV of US$1.306 billion, using an eight percent discount rate, and an average life-of-mine cash cost of negative $0.29/lb for copper.
The company was up more than 3% to $1.00 as of 2:32pm ET on Wednesday.
Disclosure: no positions