Pensana Plc (LON:PRE) has provided details of a revised financing and development strategy which will see the Longonjo operation fully funded into production.
- A revised execution plan allows for staged mine development which will reduce the upfront Capex to US$200 million with US$105 million deferred until year three.
- Major shareholder FSDEA to provide an immediate US$15 million loan facility as part of a broader US$80 million investment (subject to due diligence and the finalisation of investment terms) to facilitate the development of the mine and to provide the equity component for the proposed project debt facility.
- ABSA Bank has been mandated to arrange a US$120 million project debt facility which together with the US$80 million funding will fund the mine and processing facilities into production.
- The mine will employ around 650 people during construction and will create 420 permanent high value jobs.
- At full production, once the staged development is complete, Longonjo will target production of 38,000 tonnes per annum of mixed rare earth sulphate, containing 14,000 tonnes of TREO and 4,400 tonnes of NdPr oxide, representing around 5% of world production, for downstream processing or sold on the international market.
- Adamas Intelligence forecasts that due to demand from the electric vehicle and wind power sectors the value of NdPr oxide consumed will increase eleven-fold by 2035. Prices are forecast to rise from current levels of US$67,000 per tonne to US$100,000 per tonne by 2025, increasing steadily to over US$200,000 per tonne by 2035.
Following discussions with its major shareholders, FSDEA (Angola Sovereign Wealth Fund) and M&G, supported by Angola’s Ministry of Mineral Resources, Petroleum & Gas (MIREMPET), a detailed review was undertaken by the Longonjo engineering team to reflect the strong desire of all parties to bring the Longonjo operation into production as soon as practical.
The revised execution plan is based on a staged development of the mine and processing facilities with a reduced upfront capital cost of US$200 million, with circa US$105 million, related largely to the national power grid connection, rail spur and subsequent expansion costs, deferred until year three following commissioning.
Subsequent to the engineering redesign the Angolan Government has announced a US$83.6 million funding for the extension of the hydroelectric power line to Huambo. This has the potential to reduce the capital funding requirement for the project by US$36 million thereby potentially reducing the capex in year three to around US$70 million.
FSDEA has agreed to provide an initial US$15 million loan facility as part of a US$80 million investment (which is subject to due diligence and the finalisation of investment terms) and which will be repaid out of the larger facility, for the US$200 million staged development.
The purpose of the proposed investment is to facilitate the immediate development of the Longonjo mine and to provide the necessary support for the proposed project debt facility.
Pensana has also mandated ABSA Bank to arrange a US$120 million project loan which together with the potential US$80 million investment represents the funding required to develop the mine and processing facilities.
The funds are required to be put in place between now and the end of the calendar year in order to meet the proposed construction and commissioning schedule with first production targeted in 2025.
FSDEA’s commitment towards funding has allowed for the continuation of onsite activities for which the earthworks contractor (Grupo Nov) and Electrical contractor (Elektra) have already been mobilised.
During peak construction activity the site will employ over 650 personnel and contractors and will create over 420 full time jobs.
Wood MacKenzie, CRU and Adamas Intelligence have all forecast strong demand for NdPr oxide over the next twenty years. Adamas forecasts that due to demand from electric vehicles and wind power sectors the market for NdPr oxide will increase five-fold by 2040 leading to an undersupply of 90,000 tonnes per annum.
NdPr oxide consumption by value is expected to increase by 11-fold by 2035. Prices are forecast to increase at CAGR of 3.3% to 5.2% over the same period rising from current levels of US$67,000 per tonne to US$100,000 per tonne by 2025 and increasing steadily to over US$200,000 per tonne by 2035.
Pensana Chairman, Paul Atherley commented:
“We are delighted with the ongoing support from the Government of Angola, FSDEA, ABSA and others for the development of this important project. Longonjo is one of the world’s largest undeveloped rare earth projects which benefits from a high-grade near surface orebody, with low-cost hydroelectricity and direct access to the Lobito Corridor rail and port infrastructure.
The engineering review and the staged development has resulted in a significantly lower up front capital cost which greatly enhances the projects’ ability to be financed.
This immediate funding from FSDEA will allow CEO Tim George and the team to accelerate the work on the ground with a view to commencing main construction later in the year with a view to achieving first production in 2025.”