Mineral sands company Capital Metals PLC (AIM:CMET) said it entered into an agreement with LB Group to fund production at its high-grade minerals project in Sri Lanka.
LB Group, a manufacturer of titanium dioxide pigments and sponges used in paint and sunscreen, will enter into a 50/50 joint venture with Capital, a statement said.
The Chinese company will provide approximately US$81mln as set out by a Preliminary Economic Assessment (PEA) last May. Any further expansion will be funded evenly between the parties.
Funding will be staged and provided until the project achieves a mining rate capacity of 1.65mln tonnes per year.
Capital will earn profits as soon as shipments begin, which could be within 12 months from the start of construction, it said.
"We are delighted to have signed an MoU with LB Group, the world's leading titanium dioxide pigment manufacturer. This follows several months of discussions and due diligence by LB Group,” said chairman of Capital, Greg Martyr.
The agreement is non-binding, although LB Group has exclusivity until 31 July to negotiate a definitive agreement. The agreement also requires the approval of Capital’s shareholders in a general meeting.
“If concluded, this agreement will not only fund the project into production but will also see Capital Metals benefitting from its share of free cash flow from the very first shipment,” Martyr added.