European Nickel slashes interim losses, set to complete financing for Caldag nickel project

Laterite nickel specialist European Nickel (LON: ENK) said H1 marked “progress on all fronts” after completing a merger with Rusina Mining (ASX:RML; LON:RMLA) to secure enough funds to complete project financing of the Caldag nickel project in Turkey and recommence work on the feasibility study at the Acoje nickel propject in the Philippines.

The second tranche of the placement and the previously announced share consolidation following the completion of the merger, which was approved by 99.5% of Rusina’s shareholders, will provide the company with £6.7 million of additional funds, which, along with Rusina’s cash resources of US$1.6 million, should be enough to complete the Caldag financing.

European Nickel also reported that its discussions with Western banks had progressed significantly, resulting in joint mandate letters with Societe Generale and UniCredit, which will act as initial mandated lead arrangers for the Caldag project financing, targeting completion of the debt funding by the end of the year.

The securing of the Western bank finance allowed the company to lapse the option granted to JXTC to take a 20% equity participation in Caldag for a US$20 million investment and the purchase of 100% of the project’s production, with European Nickel saying that the price was no longer appropriate given the project’s total value of US$285 million.

The company stated that the sale of Caldag’s production to JXTC was still a possibility, though it was also in negotiations with other parties.

Progress has also been made on the legal front with the Turkish parliament set to vote on the new Mining Law, which, if passed, would allow the reissuing of forestry permits to European Nickel after they were ruled unconstitutional by the Turkish courts.

Pre-tax losses for the six months to 31 March shrank from US$10.6 million to US$6.9 million after administrative and other operating costs were slashed by 18%.

Back in February, European Nickel and Rusina Mining signed a merger deal to form a ‘new and significant nickel development company’. European Nickel proposes to acquire the entire issued share capital of Rusina through an equity-based transaction which, in February, valued Rusina at approximately £18.1 million and is capped at £27.1 million. The combined group will have a total attributable resource base of 1.35 Mt (million tonnes) of contained nickel, with forecast production of 45,000 tonnes per annum from its two projects, Çaldağ and Acoje.

Societe Generale and UniCredit Bank AG were appointed to arrange a US$300 million term loan facility and US$25 million over-run facility for the project’s development.