Queensland Pacific Metals Ltd (ASX:QPM) is advancing its debt strategy to secure project finance from government-backed lenders supported by leading commercial banks for its 100% owned TECH (Townsville Energy Chemicals Hub) Project.
The TECH Project aims to establish a cutting-edge, sustainable refinery for battery materials. It will process high-grade laterite ore imported from New Caledonia to yield nickel sulfate and cobalt sulphate, along with other valuable by-products.
This project will feature negative carbon emissions, eliminate the need for a tailings dam and avoid discharging process liquids.
Term sheets fielded
QPM has received short-form indicative term sheets (non-binding) from seven international and domestic commercial banks, which are well in excess of the target commercial bank funding requirement.
Conversations with government-supported lenders, who have indicated commitments exceeding $1.4 billion, are progressing as planned concerning loan duration, interest margins and coverage ratios.
These discussions align with QPM’s debt funding strategies.
Additionally, due diligence is advancing satisfactorily, in line with the targeted timeline of the first half of 2024. This includes the completion of crucial reports from the Lenders' Independent Consultants, requisite for obtaining final credit approval.
"Delighted at response"
“We are delighted at the response received to date from commercial financiers and their willingness to consider debt funding for the TECH Project,” QPM managing director and CEO Dr Stephen Grocott said.
“This confirms recognition of the attractiveness of the TECH Project to the global battery market and to financiers.
"Our strategy has been to initially target government-backed lending agencies and then to refine the funding structure through support from the commercial banks.
"This approach has borne fruit and we greatly appreciate the indicative support received to date. We look forward to advancing through the due diligence phase and to credit approvals.”
Debt financing in detail
QPM's debt financing approach aims to assemble a debt syndicate primarily composed of Australian and international government-backed lenders, augmented by top-tier project finance commercial banks.
So far, QPM has garnered indicative commitments exceeding A$1.4 billion in conditional funding support from government-backed lending institutions.
To fine-tune the target financing framework, QPM, alongside its debt advisor KPMG Corporate Finance, has advanced its dealings with both international and domestic commercial banks.
This outreach has culminated in receiving non-binding, Short Form Term Sheets (SFTS) from seven international and domestic commercial banks, terms of which align with the current debt funding plan.
These SFTS outline essential commercial terms and specify the credit exposure divide between government-backed Export Credit Agencies (ECAs) and non-ECA guaranteed debt, commonly known as the sweet/sour ratio.
The acquisition of these SFTS not only affirms commercial bank interest in financing the TECH Project, but the level of interaction also underlines the project's strong alignment with banks committed to backing decarbonisation initiatives. While the detailed terms in the SFTS remain commercial-in-confidence, summary highlights include:
- Debt tenor for ECA covered loan components of up to 15 years;
- Debt tenor for uncovered loan of up to 8 years;
- Interest margins meeting QPM's expectations; and
- Generally favourable sweet/sour ratio of 80/20 (ECA covered/non-ECA covered). It's important to note that the SFTS are non-binding, and any subsequent commitments hinge upon the successful completion of detailed due diligence, finalisation of the debt facility structure, and receipt of all requisite credit and other approvals.
Due diligence - part of the funding process
Lender due diligence requirements which emerge as part of the funding process are being addressed in conjunction with the various experts now engaged.
The Independent Technical Expert’s (RPM Global) review is well underway and is in its second (and final pre-FID) phase of technical review.
This includes reviewing engineering and design outcomes, visiting test-work sites and reviewing results and engineering work as it is completed.
A site visit of QPM’s New Caledonian ore suppliers is also planned.
As part of this work, QPM’s project team, in collaboration with Hatch (TECH Project lead engineer) and key technology vendors, continues with the detailed assessment underway of several key technical aspects of the TECH Project required to complete RPM’s report.
Other experts also engaged for lender due diligence include:
- CRU – nickel and cobalt market report (report delivered);
- CRU and CM Group – high purity alumina market report (in progress);
- AEC – public benefits assessment (report delivered);
- Ramboll – environmental and social impact assessment (report delivered); and
- EMM – human rights and climate change risk assessment (in progress).