Australian Mines Limited (ASX:AUZ) has updated shareholders today revealing both it and SK Innovation remain fully committed to the binding term sheet agreed in February 2018.
The term sheet related to the sale and purchase of 100% of cobalt and nickel sulphate to be produced from AUZ’s Sconi Cobalt-Nickel-Scandium Project in North Queensland.
Senior personnel from both companies continue to work collaboratively on the drafting of a long-form off-take agreement with the aim of finalising and executing the agreement during the current quarter.
At no time has SK Innovation advised it has any intention other than to execute a final long-form off-take agreement with AUZ as per the tonnages and terms outlined in the binding term sheet.
AUZ managing director Benjamin Bell said the two parties agreeing to a new deadline of September 2019 for financing without any renegotiation of other terms was evidence of the collaborative relationship and the Korean battery manufacturer’s support of Sconi’s development.
Bell said: “Although we appreciate the extension of the financing condition to September, given the progress we have been making on these negotiations since the bankable feasibility study (BFS) was released, we plan to have the entire project funding package in place during the second quarter of 2019.”
The mutually-agreed financing extension is designed to accommodate the North Australian Infrastructure Facility’s (NAIF) current due diligence and investigation into potentially providing financial support for Sconi.
The extension also provides both SK Innovation and AUZ enough time to finalise financing discussions with the consortium of tier-one lenders which have expressed interest in potentially providing debt funding.
Under the binding off-take agreement executed last year, SK Innovation is entitled to a commercial-in-confidence buyer discount on the base price, provided it subscribes for 669 million AUZ shares within three months of the BFS’ release.
If it elects not to subscribe the off-take agreement will remain in place, but SK Innovation will not be entitled to any discount.
Sconi’s BFS was released on November 20, 2018, so SK Innovation must acquire the shares at a price of 12 cents each on or before February 20, 2019.
Bell continued: “SK Innovation’s ability to acquire an equity stake in Australian Mines remains very much alive and will remain so until at least February 20, 2019.
“In the meantime, both SK Innovation and Australian Mines will continue to work towards achieving our same shared goal of finalising and executing the long-form off-take agreement in the current quarter.”
The BFS valued Sconi at about $697 million, comprising three open pits and a processing plant with annual process capacity of 2 million tonnes.
The Flemington project has an existing JORC resource of 2.5 million tonnes at 0.103% cobalt and 403 ppm scandium in the measured category.
The goal is for Flemington to act as a second production source of cobalt, nickel and scandium to AUZ’s flagship Sconi project.