Mirabela Nickel Ltd. (MNB.TO) said on Tuesday that it has entered into a 5-year off-take agreement with Norilsk Nickel Harjavalta Oy.
Under the deal, Norilsk will purchase 50% of the nickel concentrate produced at Santa Rita until the end of 2014. The nickel concentrate will be shipped to Norilsk's Harjavalta smelter in Finland.
As part of the off-take arrangement, Norilsk agreed to provide a subordinated loan facility of US$50 million for Mirabela. Norilsk has an option to convert the subordinated loan to shares in Mirabela at a price of US$8.00 per share, up to a maximum of 5 million shares.
Production from Santa Rita is expected to start mid 2009 at a capacity of 18,500tpy of nickel in concentrate, which will increase to 27,000tpy within the first year of production. Construction of the project is now about 60% complete and is on schedule.
The company also confirmed that Norilsk is granted an option to convert up to US$40 million of subordinated loan to up to 5 million ordinary shares at a price of US$8.00 per share. The option is granted in consideration of Norilsk entering into the subordinated loan agreement.
The company recently entered into a separate 5 year off-take agreement with Votorantim of Brazil for 50% of nickel concentrate produced. As a result of the two off-take agreements, the company has now secured 100% of nickel concentrate produced by the Santa Rita project until the end of 2014.
The two off-take partners have provided a total of US$100 million in subordinated debt to the company. The company noted that this subordinated debt is an important part of its overall project financing strategy, as it doesn't carry the hedging requirements of the senior debt or the dilution of straight equity.
MNB.TO is currently trading at C$3.50, down 15 cents or 4.11%.
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