Anvil Mining NL expects to develop a heavy media separation operation at its Dikulushi copper-silver project in the Democratic Republic of Congo after agreeing financing terms today with RMB Resources Ltd, part of the Rand Merchant Bank Group of South Africa.
RMB Resources will provide an immediate equity subscription of A$200,000 and a mobilisation facility of A$800,000 to initiate pre-implementation work on the project. In addition, Anvil and RMB Resources have agreed on the commercial terms on an “in principle basis” for a further US$4.5 million project financing facility.
In a statement to the Australian Stock Exchange, Anvil said it expected the funding package, together with the company's liquid assets, would be enough to see the Dikulushi project move into production as a Heavy Media Separation operation by the third quarter of 2002.
The equity subscription of A$200,000 will be for 3,636,364 ordinary shares in Anvil at A$0.055 per share.
The mobilisation facility of A$800,000 is a debt facility which is expected to be in place before the end of July 2001 and will be secured against Anvil's shareholding in Golden Star Resources Ltd. The term of the facility is one year, the interest rate is the Australian Bank Bill Swap Rate plus 2.5% and there is provision for a conversion facility that is subject to Anvil shareholder approval.
The mobilisation facility is subject to RMB Resources’ Investment Committee approval.
The commercial terms for the US$4.5 million project financing facility, on which Anvil and RMB Resources have reached agreement, comprise a term of four years, an establishment fee of 3%, interest at LIBOR plus 2.5%, a net profits interest of 14% limited to the first 125,000 tonnes of copper production and a grace period for repayment of capital of nine months after starting commercial production.
In addition, Anvil will issue to RMB Resources 10 million Anvil options with an exercise price of A$0.10 per share and an expiry date of December 31, 2003.
The proceeds from the exercise of any of these options are to be used first for prepayment or repayment of the mobilisation facility and then for the development of the project.
Anvil said RMB Resources had “indicated a sufficient level of comfort with already completed project evaluation and feasibility studywork that a bankable feasibility study will not be required for the project financing facility”.
“This is a significant concession,” Anvil executive director Bill Turner said.
The project financing facility is subject to obtaining political risk insurance to the satisfaction of RMB Resources. Turner said good progress had already been made in this respect.
RMB Resources had advised that their due diligence with respect to the project financing facility would begin immediately with the aim of obtaining RMB Resources’ Investment Committee approval in October 2001.
A Pre-feasibility Study on Dikulushi was completed by Signet Engineering (Perth) in May 1998 and established a Measured, Indicated and Inferred Resource (at a 2% Cu cut-off) of 1.94 million tonnes at an average, grade of 8.58% copper and 266 g/t silver, 85% of which is in the Measured and Indicated categories. Drilling was carried out by Anvil in the latter half of 1997.
Dikulushi is open at depth with one of the deepest drill intersections (DIK 30) intersecting 16.7 metres of 16% copper and 522 g/t silver at a vertical depth of only 165 metres.
Metallurgical Design and Management (Johannesburg) completed a Scoping Study in early 2000 aimed at putting Dikulushi into production as a staged development, the first stage of which would be a Heavy Media Separation plant, thereby minimising the up-front capital cost.
An HMS approach is expected to produce a concentrate grading approximately 37% copper and 1,000 g/t silver and with more recent work carried out by Anvil, is expected to result in a reduction of the capital costs to approximately US$5 million.
Subsequent expansion, with the addition of a ball mill and flotation circuits would be funded out of project cashflows and would produce a very high-grade concentrate averaging 60% copper and 1,935 g/t silver.
Turner believed the political situation in the Democratic Republic of Congo (DRC) had continued to improve since the country's new president, Joseph Kabila was inaugurated in January 2001.
“The change in leadership appears to have ushered in a new willingness to find a political rather than a military solution to restoring peace, a willingness to move towards a more democratic form of government and a commitment to rebuilding the economy of the country.”
He said President Kabila's actions had been strongly endorsed by foreign governments, resulting in significant financial support beginning to emerge and a “very significant re-engagement after many years of absence” of key multilateral organizations such as the International Monetary Fund, the World Bank and the United Nations.
“The situation in the DRC is now very different from that of six months ago.”