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UPDATE - Ormonde Mining unveils long-awaited financing package for flagship Barruecopardo mine

Ormonde Mining has unveiled a financing package for its flagship Barruecopardo tungsten project in Salamanca, Spain, which would see it on the road to production in the second half of 2016.
UPDATE - Ormonde Mining unveils long-awaited financing package for flagship Barruecopardo mine

---ADDS BROKER COMMENT----

Ormonde Mining (LON:ORM) has unveiled a financing package for its flagship Barruecopardo tungsten project in Salamanca, Spain, which would see it on the road to production in the second half of 2016.

It has entered into an exclusivity period with global investment manager Oaktree Capital on a deal, which would secure the project's development and would also allow the firm an early evaluation of a stage-2 expansion.

The exclusivity period runs until April 10 this year and Oaktree would hold a majority stake in the site.

Oaktree has also agreed to provide Ormonde with a US$1.5mln loan, repayable after six months from drawdown.

This will give working capital in the short term, while Ormonde finalises the project finance arrangements.

Kerr Anderson, Ormonde managing director, told investors the exclusivity arrangement followed a "considerable period" of exploring multiple avenues for funding. 

"Completion of the financing package for our flagship Barruecopardo Tungsten Project, would mean that Ormonde is in a position to rapidly advance the project through its development stage during 2015 and towards production in the second half of 2016."

The funding package will be split between debt and equity and Oaktree would hold a majority position in the project.

Ormonde would be manager and receive an ongoing management fee.

Substantial progress is currently being made on the site, including  power line construction designs underway and negotiations for water supply finalised.

A shortlist of construction sub-contractors has been drawn-up and statutory manager and environmental officers have been appointed, Ormonde revealed.

Resource focused broker SP Angel noted that original expectations had been for around 70% company debt with the balance of some form of equity for a total package of around €70mln.

"Without knowing the split between equity and debt it is difficult to judge whether the deal on the table from Oaktree Capital of debt at the PLC level and project equity is better than debt and equity at the PLC level," said John Meyer.

He reckons Barruecopardo is a valuable asset, which is now permitted and patient shareholders should hold on "to see the final terms on this package".

Interestingly, the analyst also noted that current tungsten prices are below the base case in the definitive feasibility study of US$350/mtu -  16% higher than the current spot price of US$292.5. 

However, he reckons that a US$350/mtu price for tungsten is supported by the supply/demand dynamics and Barruecopardo still stacks up even at a tungsten price of US$250/mtu.

"In addition the Euro is now much weaker when the DFS was set at US$1.30 against current spot of US$1.14 which will make the project cheaper to operate."

Ormonde Mining shares eased 9.6% to 2.825p.

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Article
February 29 2016

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