Pilbara Minerals (ASX: PLS) has successfully raised $1.5 million through a convertible note issue to sophisticated investors, underpinning plans to progress its flagship Tabba Tabba Tantalum Project in Western Australia to production this year.
The funds raised will be used to complete the acquisition of a 50% interest in Tabba Tabba, and for the ongoing approval process currently being progressed by joint venture partner Nagrom Mining.
Last month Pilbara Minerals completed a Feasibility Study on the development of the project, which is located 84 kilometres by road from Port Hedland in Western Australia, with the results demonstrating robust economics.
The Feasibility Study defined an initial mine life of 19 months producing 365,000 pounds of tantalum pentoxide, within a minimum 5% concentrate, delivering earnings before interest, tax, depreciation and amortisation of $16 million.
First production is forecast for the third quarter this year.
The funds raised will allow Pilbara to secure 50% of Nagrom Mining, which holds the right to mine and process tantalum ore from Tabba Tabba, for $1.2 million.
The initial $200,000 was paid to Nagrom in November 2013. Once Pilbara receives the funds from the convertible note issue, Pilbara will pay $1 million to Nagrom, less the expenditure incurred completing the Feasibility Study.
This amount will be paid to Nagrom in the form of $710,000 cash and 10 million Pilbara shares.
Drilling for hydrology studies is expected to start at the end of March, which is required for the water extraction permit, as well as a water monitoring bore for the proposed Tailings Storage Facility.
The capital raising comprises a placement of 1.5 million convertible notes at an issue price of $1 each, with a duration of 18 months, and an interest rate of 20% per annum.
Conversion price for the notes is at a 25% discount to the volume weighed average price of the previous 5 days trading.
Attaching options at 100 Options for every $3 convertible notes will also be issued. These will have an exercise price of $0.03, exercisable on or before 3 years from issue date.
The Tabba Tabba Project, acquired from global tantalum producer, Global Advanced Metals, will be developed under a five-year mining and off-take agreement, providing price and cash flow certainty.
Tantalum’s major use is in the production of electronic components, especially for capacitors, with additional use in nuclear power plants and airplanes.
The market is boutique in size with around 1300 tonnes required each year, and rapidly growing due to capacitor use in wireless and handheld devices.
Tabba Tabba could supply approximately 7% of the annual market consumption over two years.
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