Cadence Minerals (KDNC) has executed a binding prepayment off-take agreement in respect of the Amapá iron ore project in Brazil.
The agreement has been signed in conjunction with joint venture partners Pedra Branca Alliance and DEV Mineração.
The agreement follows the completion of the offtaker's technical, legal, and commercial due diligence on Amapá.
The agreement provides a US$4.6 million prepayment and working capital facility, provided jointly by the offtaker and Cadence.
The facility includes US$3.45 million to complete licensing, refurbishment and commissioning of the plant, and US$1.15 million of working capital for logistics and the first shipment.
The first tranche totals US$1.17 million, of which Cadence will contribute US$391,000 and the offtaker will fund the balance. These funds will be used to obtain the outstanding permits, including the mine installation licence, enabling construction and rehabilitation of the Azteca Plant and the tailings storage facility to begin.
The offtaker will also fund US$2.43 million in the second tranche and US$1.15 million of working capital. These amounts become available once the relevant construction and production licences are granted and, in the case of working capital, once first production has commenced.
The money will enable the licensing and restart of the Azteca plant at Amapá.
This prepayment structure is expected to deliver an approximate 70% internal rate of return on Cadence's investment, with no further equity required to bring Azteca into production.
Once in production, Azteca is expected to generate early cashflow that supports working capital, operations and the Amapá definitive feasibility study.
Cadence's contribution to the facility was funded through its recent oversubscribed equity raise, allowing immediate access to Tranche 1 of the prepayment facility.
The next step will be the attainment of a mine installation licence, after which refurbishment and commissioning of the Azteca plant will commence.
"Executing the binding agreement is a major milestone in our staged approach to bringing Amapá back into production,” said Kiran Morzaria, chief executive of Cadence Minerals.
“With due diligence complete and initial funding now available, we can progress the final licensing items ahead of commencing the refurbishment of the Azteca plant. The structure ensures Cadence contributes a modest proportion of the capital while retaining full exposure to the near-term cashflow and the wider development of the project. We now move confidently towards the installation licence and the start of restart activities."
View from Vox
Good to see funding for the re-start of the Azteca plant falling into place, with Cadence’s contribution already financed. It’s a key step in the long-term redevelopment plan for Amapa, which hosts a sizeable 276 million tonne iron ore resource grading at 38% iron. Cadence’s shares have more than doubled since the summer, and this news should add further support to that recent strength.