China development bank to fund Kanyika project

China Development Bank (CDB), one of China’s largest government-owned banks, has issued a Letter of Intent (LOI) to Globe Metals and Mining confirming that it will finance Kanyika Niobium Project in Mzimba which has a capital cost of $220 million (K55bn).

The Australian Stock Exchange (ASX)-listed miner said in a statement on Tuesday, the receipt of LOI marks an important step towards bringing Kanyika into production of ferroniobium, a key additive in sophisticated steels, in 2014.

“The LOI is non-binding, and subject to a number of conditions, including technical and financial due diligence, concluding terms for the provision of finance, relevant approvals from the governments of Malawi and China and approval from the CDB credit committee,” said the statement.

The Kanyika project, with a 20-year lifespan, an annual production of 3 000 tonnes per annum of niobium metal, tantalum and uranium credits, has a capital cost of $220 million, a net present value (NPV) of $300 million (K75bn) and will bring in annual revenues of $180 million (K45bn).

Globe is an African-focused resource company, specialising in rare metals such as niobium, tantalum and rare earths as well as other commodities including fluorite, uranium and zircon.

The miner also has a number of other projects at an earlier stage of development. It owns 100 percent of the Machinga Rare Earth Project, and the company can earn up to a 90 percent interest in the Mount Muambe Rare Earth Element (REE) – Fluorite Project and the Memba Titanium – Iron Project, both in Mozambique.

In April 2011, the company entered into a strategic partnership with East China Mineral Exploration and Development Bureau (ECE), a Chinese State-owned enterprise which bought 51 percent stake into the miner.

Globe’s managing director Mark Sumich said in a statement that one of the key rationales for the Globe-ECE strategic partnership and cooperation was to demonstrate to shareholders their ability to bring Kanyika into production.

“Our association with CDB is a major step towards delivering on this objective and came about primarily as a result of our strategic partnership with ECE,” he said.

The bank in a statement said it is delighted to be involved in Kanyika Project and look forward to working with Globe to put final and binding financing arrangements in place, once the Definitive Feasibility Study (DFS) for the project is completed in December 2012.

“Ferro-niobium is a critical additive in the production of sophisticated steels by Chinese steel mills and the expected growth in the consumption of both niobium and steel in China is significant, so the participation of the CDB in this project makes sense. The involvement of ECE as Globe’s largest shareholder satisfied a vital prerequisite, as our bank typically requires a Chinese partner for financing arrangements of this nature,” said CDB.

CDB, established in 1994, is an integrated financial enterprise devoted to medium to long-term financing and investment and it is the largest foreign investment and financing bank in China.