ENERGY MINERALS

Australian Mines moves to $1.3B Sconi funding after feasibility

Australian Mines believes nearly A$800 million (US$585 million) in debt could potentially be found to help fund its $1.33 billion Sconi cobalt-nickel-scandium development in Queensland.

Michael Quinn
 Drill rigs and equipment at Sconi in Queensland, Australia

Drill rigs and equipment at Sconi in Queensland, Australia

The estimate is attributed to Australian Mines' financial advisor Medea Capital Partners, a UK-based firm currently "in initial discussions with several Australian based commercial lenders in relation to providing additional senior secured debt funding as part of the overall US$585 million debt facility" for Sconi.

Australian Mines believes a syndicate of between 6-8 lenders (including the Northern Australia Infrastructure Fund) will be sufficient to fully fund the debt facility.

It believes the balance of the $1.33 billion needed could come from equity, pre-payment of the project's projected nickel sulphate and cobalt sulphate output, streaming and/or royalties, and mezzanine financing.

In March, Australian Mines signed an agreement with Korean-headquartered SK Innovation under which the firm committed to buying all nickel and cobalt produced from Sconi for an initial seven-year period.

Other key financial metrics revealed in the bankable feasibility study included average annual earnings of $295 million (EBITDA) and a post-tax net present value of $697 million.

An internal rate of return of 21% on a pre-tax basis was also reported, with pricing for nickel of US$7 per pound and cobalt $30/lb used.

The project is initially flagged to produce nearly 10,000t per annum of cobalt sulphate and 71,000tpa of nickel sulphate.

Australian Mines started the current quarter with A$7.8 million cash.

Shares in Australian Mines (ASX: AUZ) were up 3% to 6.2c in afternoon trade, capitalising the company at $165 million.

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