Sherritt reports financing for Ambatovy project

Toronto-Sherritt International Corp. said Aug. 24 that it has executed financing agreements for the provision of US$2.1 billion of project debt to the Ambatovy nickel project with a group of international lenders based in Japan, Korea, Europe, Canada, and Africa. First disbursement of funds is expected after the satisfactory completion of certain conditions precedent; Sherritt expects these conditions to be satisfied later this year. The project construction is proceeding on schedule to achieve mechanical completion during the first half of 2010. Sherritt says the financing agreement represents one of the largest project finance agreements ever completed in the mining industry, and is based upon the total support of the government of Madagascar. All loans have a 17-year term. Sherritt and the other sponsors will provide completion guarantees for the financing until Ambatovy has satisfied the required completion tests, at which time the project debt will become non-recourse to the sponsors. Sherritt’s pro-rata share of the completion guarantees total US$840 million, of which US$598 million is guaranteed from the project’s other sponsors. Ambatovy’s other sponsors have also agreed to provide Sherritt with subordinated loans to an aggregate of US$236 million to fund Sherritt’s equity commitments to the Project. Upon the fulfillment of certain conditions precedent, SNC-Lavalin will acquire a 5 percent interest in Ambatovy from Sherritt, thereby reducing Sherritt’s interest to 40 percent. Sumitomo Corp. of Japan and Korea Resources Corp., leading a consortium of Korean business enterprises, each own a 27.5 percent interest in the project. Following completion of the project, a put/call arrangement will come into effect whereby SNC-Lavalin can divest of its interest to Sherritt and Sumitomo, or Sherritt and Sumitomo can acquire SNC-Lavalin’s interest. Ambatovy is a large-tonnage nickel and cobalt project located in Madagascar. The project has estimated probable reserves of 125 million mt grading 1.04 percent nickel and 0.099 percent cobalt; annual production capacity is estimated at 60,000 mt (100 percent basis) of nickel, 5,600 mt (100 percent basis) of cobalt, and approximately 190,000 mt (100 percent basis) of ammonium sulfate. The project has an estimated project life of approximately 27 years.