Avanti Mining (AVT:TSX) has been a dog for the better part of four years with the share price collapsing from a high in 2010 of $0.37 to a low in April of $0.04 per share.
After securing their mining permit and signing off with the First Nations groups in the area this past June, the company announced today that it has signed a mandate letter for a $612 million project debt facility.
That is over 16x their current market capitalization.
The Kitsault project is expected to cost $818 million to build so the company will still need a significant amount of equity in order to complete the built.
Until that last financing piece is found, the overhang on the stock will remain and the shares could stay at current levels.
The facility is being coordinated by a syndicate of six lenders including: BNP Paribas, Caterpillar Financial Services Corp., Export Development Canada, Korea Development Bank, Mizuho Bank Ltd. and UniCredit Bank AG.
The debt package is comprised of US$500-million of senior debt for a term length of 10.5 years, US$42-million in equipment finance for a term of 5 years and US$70-million in overrun facilities for a term of 8 years.
"We welcome the financial support of our banking partners and we can now focus on advancing equity funding options to complete our $818-million initial construction capital requirement for Kitsault. With the execution of off-take agreements with ThyssenKrupp Metallurgical Products GMBH and SeAH M&S, the conclusion of a benefits agreement with the Nisga'a Nation, the receipt of construction and environmental approvals for the Kitsault project, commencement of construction activities at site, and now the pending agreement on the cornerstone project financing component, the Kitsault project moves significantly closer to a positive production decision," stated Gordon J. Bogden, President and CEO.
After announcing a management shuffle which saw veteran mining investment banker Gordon Bogden (founder of Gryphon Partners which was subsequently sold to Standard Chartered Bank) become President and CEO, the company has been making some major headway. Finalizing permits, signing benefit agreements with the First Nations and now finding the primary part of the funding requirements.
Avanti is developing the high-grade and large-scale Kitsault molybdenum project which is one of the largest primary moly assets in the world. It is located in northern British Columbia.
Since the company began development planning for their bulk-tonnage primary moly mine, the price of the commodity plummeted along with their share price. Molybdenum is used in the steel making process.
Kitsault is a past producing mine, having produced an estimated 9.3 million tonnes of ore recovering 22.9 million pounds of molybdenum between 1968 and 1972.
The Kitsault project host 231.1Mt of 0.082% Mo containing 420.3 million pounds of molybdenum in 2P reserves.
The project is estimated to produce 11,570t of Mo over an initial 14 year mine-life at $6.78 per pound operating costs.
Management is guiding a 2017 start date for the project.
Construction has already begun with the company getting initial funding from Denver-based mining private equity firm Resource Capital Funds as well as funding from signing 70% offtake agreements with Thyssen Krupp and SeAH.
Read: Avanti Mining Signs Mandate Letter for US$612 Million Debt Finance Facility