IMX Resources’ (ASX: IXR) joint venture company operating the Cairn Hill iron ore and copper mine, Termite Resources, has secured a A$15 million revolving line of credit from the LinQ Resources Fund (ASX: LRQ).
The LinQ Resources Fund is managed by LinQ Capital, part of boutique investment house LinQ Group.
Importantly, securing this finance is a vote of confidence in Cairn Hill, which is operating cash flow positive and operating at design capacity.
Further upside is it strengthens IMX’s balance sheet following the proposed acquisition of Continental Nickel (CVE: CNI), with Termite now able to repay $10.8 million in loans to IMX.
The 12 month terms of the line of credit are 13% per annum interest on funds drawn down, and 6.5% interest on undrawn funds.
Neil Meadows, managing director of IMX Resources commented on the positive milestone:
“Securing the line of credit is part of a strategy agreed by the joint venture partners to address the funding shortfall that occurred in the December and March quarters when pre-stripping of waste at the operations resulted in a cash flow deficiency.
“The repayment of the secured loan from Termite adds additional strength to IMX’s balance sheet as we are seeking to consolidate the ownership of the potentially world-class Nachingwea Nickel-Copper Project in Tanzania.”
Earlier this month, IMX announced it will bring the Nachingwea Nickel Copper Project in Tanzania under full control, strengthening the balance sheet and reducing impediments to achieving production in 2015.
IMX and joint venture partner Continental Nickel have agreed to a business consolidation that will bring all of their activities under one single entity.
The move will simplify the structure of the two companies and reduce the complexities associated with bringing Nachingwea into production.
The project is currently operated as a joint venture, with Continental as operator owning 75% and IMX owning 25%.
Cairn Hill funding
Activities on the project pipeline of the combined activities of IMX and Continental will be underpinned by cash flow from IMX’s Cairn Hill Mining Operation.
Cairn Hill is operated by Termite Resources, which is owned by Outback Iron, a joint venture between IMX (51%) and Taifeng Yuangchuang International Development Co (49%).
Phase one of production at the Cairn Hill project is a unique magnetite iron-copper-gold direct shipping ore operation, producing a premium coarse grained magnetite product with a clean saleable copper-gold concentrate.
IMX has also announced a phase two resource, which the joint venture project group is accelerating to begin production of a saleable iron intermediate concentrate of about 60%.
While the softening of iron ore and copper prices in recent months has seen the pricing of Cairn Hill magnetite copper ore under the phase one life of mine sales contract reduce by 25%, operations at the minesite are performing at designed capacity with cash operating costs free on board trending towards the target of A$75 per tonne with opportunities for further improvement already identified.
Importantly, Cairn Hill is located close to the Darwin to Adelaide railway, 55 kilometres southeast of Coober Pedy.
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