EPM news out...
European Minerals acquires Varvarinskoye financing
European Minerals Corp (TSX:EPM)
Shares Issued 196,077,122
Last Close 11/30/2005 $0.78
Thursday December 01 2005 - News Release
Mr. Tony Williams reports
EUROPEAN MINERALS CORPORATION: MAJOR MILESTONES ACHIEVED AT VARVARINSKOYE PROJECT IN KAZAKHSTAN -- VARVARINSKOYE DEBT FACILITY SIGNED - GOLD HEDGING PROGRAMME AGREED - TURNKEY CONSTRUCTION AND COPPER/GOLD CONCENTRATE SALES CONTRACTS CONCLUDED
European Minerals Corp. has reached several major milestones at its Varvarinskoye gold/copper project in Kazakhstan.
Debt facility
A debt facility of $75.4-million (U.S.) has been concluded with Investec Bank (U.K.) Ltd., and Investec Bank Ltd. and Nedbank Ltd., to financed the debt portion of the Varvarinskoye project financing. EMC is the guarantor of the debt until project completion and its 100-per-cent-owned subsidiary JSC Varvarinskoye is the borrower. The limited recourse debt facility consists of:
a commercial loan facility of $28-million (U.S.); and
a loan facility supported by the Export Credit Insurance Corp. of South Africa (ECIC) of $47.4-million (U.S.).
The commercial loan and the ECIC loan was fully underwritten in equal parts by Investec and Nedbank. Investec acted as arranger of the debt facility.
Both the commercial loan and the ECIC loan are for an eight-year term with a semi-annual repayment schedule commencing 24 months after first drawdown, which is expected to be before the end of January, 2006.
Interest rates are Libor plus 1.25 per cent on the ECIC loan for the life of the loan and Libor plus 2.8 per cent on the commercial loan during the construction period, falling to Libor plus 2.3 per cent when the project has passed the standard completion tests stipulated by the lenders.
The project capital cost is approximately $112-million (U.S.). In addition there are capitalized financing and insurance costs which amount to $13-million (U.S.). The company will finance the difference between the total capital cost and the $75.4-million (U.S.) debt facility with $49.6-million (U.S.) of equity from its existing cash resources, of which $42.6-million (U.S.) has already been expended on the project.
Gold hedging facility
As part of the debt facility arrangements, EMC has agreed to implement a gold hedging facility for the period of the debt facility. The hedge, in the form of a monthly United States dollar flat forward gold sale over the eight-year term of the debt facility, will be executed by the company prior to first drawdown of the debt. The gold hedge will represent approximately 50 per cent of production during the term of the debt facility, but only around 19 per cent of the current proven and probable reserves of gold calculated at a gold price of $375 (U.S.) per ounce. Approximately 80 per cent of gold which will be produced at Varvarinskoye will be as dore at the mine site (see news issued in Stockwatch dated Nov. 10, 2004).
Copper concentrate sales contract
EMC has concluded a copper/gold concentrate sales contract with Trafigura Beheer BV, a major international commodity sales and trading organization. The contract is for the full production of copper/gold concentrates for the life of mine, estimated to be 600,000 tonnes at an average grade of 17 per cent copper and 20 grams per tonne gold (November, 2004, Varvarinskoye gold/copper project bankable feasibility study filed on SEDAR on Nov. 26, 2004). Trafigura will take delivery of the copper/gold concentrate at the Bataly junction rail loading facility located 14 kilometres south of Varvarinskoye mine. An existing road between the mine and Bataly junction is currently being upgraded, the cost of this work and the improvement of the rail junction is included in the project capital cost. Payment for copper will be made based on the LME (London Metal Exchange) copper Grade A settlement quotation (the underlying copper price has not been hedged). Payment for gold contained in the concentrate will be based on the average of the London AM/PM quotation.
Lump sum turnkey contract
JSC Varvarinskoye has entered into a lump sum turnkey contract (LSTK) for the supply and construction of the Varvarinskoye process plant and associated infrastructure with MDM Ferroman (Pty.) Ltd. (MDM) of Johannesburg, South Africa. The LSTK contains the standard mining industry undertakings associated with this type of contract, including process guarantees and completion tests. Under the LSTK, MDM will supply the equipment for and build a process plant to treat a minimum of 4.2 million tonnes of ore per year from the Varvarinskoye deposit. The LSTK cost is $55.7-million (U.S.) and the scheduled contract completion date is December, 2006.
The Varvarinskoye capital cost, including the process plant, infrastructure, mine fleet purchase, prestripping of overburden and working capital, is approximately $112-million (U.S.), which continues to be in line with the estimate contained in the company's prospectus dated March 31, 2005. The capitalized financing and insurance costs are $13-million (U.S.), bringing the total capital cost for the project to $125-million (U.S.).
About Varvarinskoye
EMC is developing an open-pit mine at its 100-per-cent-owned Varvarinskoye gold-copper deposit in Northern Kazakhstan. Independently estimated mineral resources are 2.82 million ounces of gold and 347.2 million pounds of copper in the measured category and 1.01 million ounces of gold and 84.5 million pounds of copper in the indicated category. Proven and probable mineral reserves (at metal prices of $375 (U.S.) per ounce for gold and $1.00 (U.S.) per pound for copper) are 2.34 million ounces of gold and 269 million pounds of copper (80 per cent in the proven mineral reserve category). The first gold pour is expected in December, 2006, with production at an average annual rate of 145,000 ounces of gold and 18.4 million pounds of copper over the first 10 years of the 15-year mine life, at cash cost of $130 (U.S.) per ounce (copper at $1 (U.S.) per pound taken as a credit).
All estimates of mineral resources and reserves are contained in the technical report entitled "Varvarinskoye Gold-Copper Project Northern Kazakhstan," dated November, 2004, and amended March, 2005, prepared in accordance with Canadian National Instrument 43-101 and filed on SEDAR on March 31, 2005.
Tony Williams, chairman of EMC, commented today:
"We are delighted with the achievements outlined in this press release which mark several major steps forward for the company. Our Varvarinskoye project is now fully financed on very competitive terms and our gold hedging programme will mean that early cash flow from Varvarinskoye will be at much higher levels than envisaged in our feasibility study.
"Varvarinskoye is on schedule to become a significant gold and copper mine and to form the cornerstone for further development of EMC."
© 2005 Canjex Publishing Ltd. |
