Pacific Nickel Mines gains Glencore approval to commit to US$22 million project loan facility

Pacific Nickel Mines (ASX:PNM) reports Glencore (LON:GLEN) has today (5 April) confirmed approvals to execute an up to US$22 million loan facility agreement for the Kolosori Nickel Project.

Pacific Nickel says the Swiss multinational commodity trading and mining company has provided a letter of commitment confirming receipt of its internal management approvals to execute the loan facility agreement and amended sales agreement for Kolosori.

The loan agreement and amended sales agreement are not binding until executed. The agreements are subject to the finalisation of legal documentation and the fulfillment of usual conditions.

Pacific Nickel’s debt advisor for the transaction is Blackbird Commodity Partners and its legal advisor is MinterEllison.

The funds being raised with US$57 billion market capitalisation company Glencore are expected to enable Pacific Nickel to meet pre-production funding requirements of the project.

Speaking to about Glencore’s anticipated participation in the project, Pacific Nickel CEO Geoff Hiller says the letter of commitment to provide up to US$22 million in a senior secured debt facility is an important milestone for the development of the project.

“While the current Glencore deal is expected to be sufficient to meet pre-production funding for the Kolosori nickel DSO project, if necessary the company may seek funding from Glencore to help facilitate the development of its second asset, the Jejevo Nickel Project.

Once the Kolosori Nickel Project has ramped up to full production, the immediate focus for the company will be bringing the Jejevo Nickel Project online, which will follow the same blueprint as Kolosori. Following on from this the company can seek to explore further projects in the Solomon Islands Nickel Laterite belt or pursue similar projects in other jurisdictions. Our immediate focus though, however, is bringing online our two projects in the Solomon Islands.”

“Once the Kolosori Nickel Project has ramped up to full production, the immediate focus for the company will be bringing the Jejevo Nickel Project online”

The company has worked closely with the Swiss multinational company since first announcing the granting of a mandate to Glencore in June 2022. The company anticipates it will be in a position for an initial draw down of US$3 million once documentation has been completed. This will enable the company to continue the current development works.

Hiller adds that Pacific Nickel believes that the project holds relatively low technical risk and that capital payback will be achieved in under 12 months.

Key terms associated with the debt and sale facilities include, among other aspects, a project loan facility of up to US$22 million; a 3-year repayment term commencing after the first shipment and with no scheduled repayments due during the wet season months; competitive margin above the US Secured Overnight Financing Rate; and no mandatory hedging.

In terms of offtake, the 6-year deal includes a take or pay contract where the price received is linked to agreed 1.5% DSO nickel benchmarks and adjusted for nickel and moisture bonus/penalty payments.

Quantity will be 100% of mine production during the term with FOB Kolosori delivery basis with 85% payment upon provisional invoicing.

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Images: Pacific Nickel Mines Ltd
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Written By Adam Orlando Editor-in-Chief Adam Orlando has more than 20 years’ experience in the media having held senior roles at various publications, including as Asia-Pacific Sector Head (Mining) at global newswire Acuris (formerly Mergermarket). Orlando has worked in newsrooms around the world including Hong Kong, Singapore, London, and Sydney.