Savannah Project Restart
On the 16 July 2018 the Company announced that the Board made the formal decision to restart operations at the Savannah Project. The Company immediately commenced Phase Two of pre-production activities targeting first shipment of Savannah nickel concentrate to China early in the March quarter of 2019.
Once commissioned, the Savannah Project will ramp up to full production over 15 months to a forecast Life-of-Mine (LOM) average annual production rate of 10,800t Ni, 6,100t Cu and 800t Co metal contained in concentrate.
Savannah Nickel Mines Pty Ltd (a wholly owned subsidiary of Panoramic) executed a credit approved term sheet with Macquarie Bank Limited for Project Finance Facilities (“Facilities”) in July 2018. The Facilities to be provided consist of a secured project loan of up to A$40 million and nickel and copper hedging lines. The combination of the equity raised in February 2018 via the 1 for 7 Entitlement Offer and the Macquarie project loan of up to A$40 million means the Savannah Project restart is fully funded.
Savannah Nickel Mines Pty Ltd as Borrower and Panoramic as Guarantor, have agreed the terms of a secured project loan for the development, working capital and associated costs of the Project. The terms of the project loan are as follows:
- Principal – up to A$40 million;
- Margin – very competitive for a financing of this style;
- Availability – upon execution of full documentation and satisfaction of limited conditions precedent;
- Repayment Schedule – quarterly repayments commencing 31 March 2020;
- Final Repayment – 31 December 2021;
- Loan Covenants and project ratios– customary for this size of facility; and
- Loan Security – the Savannah Project.
The financing also incorporates mandatory and discretionary nickel and copper hedging facilities. The mandatory initial hedge program has been completed, being 7,000t Ni for delivery between February 2019 and June 2021 at an average achieved forward price of A$8.51 per pound and 3,000t Cu for delivery between February 2019 and June 2021 at an average achieved forward price of A$3.71 per pound.
New Concentrate Offtake Agreement
Savannah Nickel Mines Pty Ltd executed a new Concentrate Sales Agreement (“Agreement”) with Sino Nickel (a joint venture company owned 60% by Jinchuan and 40% by Sino Mining International Limited).
This new Agreement replaces the Extended Concentrate Sales Agreement (dated 26 March 2010), which was due to expire on 31 March 2020. The terms of the new Agreement will be applicable from the first shipment of concentrate from the recommissioned Savannah Project and incorporate improved payabilities for certain contained metals compared to the 2010 Extended Concentrate Sales Agreement. Panoramic believes that the terms of the Agreement are highly competitive in the global market for Savannah’s bulk nickel-copper-cobalt concentrate.
The general terms and conditions of the new Agreement are as follows:
- Product – sulphide concentrate with a typical specification of 8% Ni, 4.5% Cu, 0.6% Co, 46% Fe, <1.0% MgO;
- Quantity (in-bulk) – 100% of production from the Savannah Project;
- Load Port – Wyndham, Western Australia;
- Payable metals – Ni, Cu and Co;
- Price basis – agreed % of LME cash price for Ni and Cu and agreed % of Metal Bulletin Co price; and
- Life of new contract – 4 years commencing from the date of the first shipment or 31 March 2019, whichever occurs first.
Between 2004 and 2016 the Company shipped over 1.2 million dry metric tonnes (dmt) of nickel-copper-cobalt concentrate, worth in-excess of US$1.4 billion, from Wyndham Port through to Jinchuan’s smelter/refinery in Gansu province, northwest China. Panoramic is delighted to have completed the new offtake arrangements with Jinchuan/Sino Nickel on mutually agreed terms, which further cements the already strong relationship between the organisations. Based on the long association with Jinchuan/Sino Nickel and the competitive terms of the new Agreement, it is Panoramic’s view that the unique characteristics of the Savannah concentrate (payable Ni, Cu and Co, low MgO, and no penalty elements) make it an ideal feed for Jinchuan’s smelter.
The new Agreement, which will cover concentrate produced from the Savannah and Savannah North orebodies, is was an important condition precedent to restarting the Savannah Project.
Jinchuan Group Limited
Jinchuan is a Chinese state-owned enterprise located in Jinchang City, Gansu Province, northwest China with total assets of US$18 billion (2017). Jinchuan mines, smelts and refines nickel and copper sulphide ores and currently has an installed capacity of 150,000 tonnes per annum (“tpa”) nickel, 800,000 tpa copper and 10,000 tpa cobalt.
Sino Mining International Limited
Sino Mining International Limited (“Sino Mining”) is a resource investment and trading company controlled by China Minmetals Group. Sino Mining’s business charter is to secure raw material supplies for the Chinese non-ferrous metals industry and to take strategic investments in resource projects outside China. As at 30 May 2018, Sino Mining had total assets of US$132 million. Sino Mining has a long-term alumina supply agreement with Alcoa under which it regularly ships smelter grade alumina to China. Sino Mining also owns the agency business, Sino Mining Trading, which facilitates raw materials trading.