THIS
ANNOUNCEMENT CONTAINS INSIDE INFORMATION
Pensana
Plc
("Pensana"
or the "Company")
Update on
Longonjo Financing and Development
Pensana
Plc (LSE: PRE) is pleased to provide 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.
The
Company 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."
About
Longonjo
Longonjo
hosts one of the world's largest undeveloped rare earth deposits
with an initial 20-year mine life and with considerable exploration
potential to extend the resource base both immediately below the
existing orebody as well as at the recent discovery on the Coola
exploration licence.
Longonjo
Proved and Probable Ore Reserve September
2022 reported using a 0.3% NdPrO (approx.)
cut-off
Classification
|
NdPrO cut-off
(%)
|
Tonnes (Mdt)
|
NdPrO
(%)
|
TREO (%)
|
NdPrO
(t)
|
TREO
(t)
|
Proved
|
0.3-0.4
|
13.3
|
0.67
|
3.19
|
89,300
|
424,000
|
Probable
|
0.3-0.4
|
16.8
|
0.46
|
2.05
|
77,000
|
323,000
|
Total
|
0.3-0.4
|
30.1
|
0.55
|
2.55
|
166,000
|
767,000
|
Notes:
-
Million
tonnes are dry and rounded to one decimal place. Grades are rounded
to three significant figures.
-
No
fixed cut-off is applied to the rare earths NdPrO, the cut-off
varies between 0.3% NdPrO and 0.4% NdPrO.
-
The
variable
NdPrO
cut-off
reflects
the
block
cash
flow
positive
method
used
to
determine
the
economically
viable
portion of the resource.
-
NdPrO
tonnes and grade is inclusive of the TREO and not additional to
it.
The near
surface, deeply weathered orebody, has an average depth of less
than 30 metres, with an average mine grade of 3.73% TREO and 0.79%
NdPr over the first five years.
The
process routes and key equipment required for beneficiation of the
mined material at Longonjo are those commonly used in the broader
minerals processing industry.
Following
comminution and flotation, the
rare earth mineral concentrate
is
subjected
to
acid
roast,
leaching and
selective
precipitation to produce
a mixed rare earth double sulphate (MREDS) or mixed rare earth
carbonate (MREC) providing customers with a clean,
radionuclide-free product available for export via the recently
refurbished Port of Lobito.
The
Longonjo operation is located close to major existing
infrastructure in the form of the recently upgraded Benguela
railway line, linking the project to the Atlantic Port of Lobito,
(the Lobito Corridor) and hydro-power infrastructure.
The US
International Development Finance Corporation is currently
performing due diligence for a potential US$250 million investment to finance the Lobito
Atlantic Railway Corridor to connect the DRC Copperbelt with the
Port of Lobito. The Lobito Corridor is anticipated to become one of
most important rail transport infrastructure systems within the
South African Development Community (SADC) region over the next 25
years.
This
follows the award of a US$450 million
contract by the Angolan Ministry of Transport to a consortium of
Trafigura, Mota-Engil and Vecturis to operate and maintain the
Benguela railway through to the DRC Copperbelt on a private
concession basis, as part of the Lobito Corridor
development.
This is
expected to have a positive impact on the transport logistics
during the construction period and for reagent and product
transport during operations.
At full
production, after completing the phased development, the mine will
target production of up to 38,000 tonnes per year of MREDS or mixed
rare earth carbonate (MREC) containing 14,000 tonnes of TREO and up
to 4,400 tonnes of NdPr oxide, equating to around 5% of the global
annual production of NdPr oxides for downstream processing or sold
on the international market.
The
Longonjo
Ore
Reserve
estimate was
prepared by Snowden
Optiro in August 2022
as
part
of
the
Longonjo Project Feasibility
Study,
using
the
guidelines of
the
Australasian
Code
for
Reporting
of
Exploration
Results,
Mineral
Resources
and
Ore
Reserves (JORC
Code,
2012
Edition).
The
Competent Person's statement for Longonjo Ore Reserves was released
on 23 September 2022 and is available
on the Company's website
www.pensana.co.uk/company-reports
About
Angola
The
Angolan government has implemented a modern mining code with an
attractive fiscal regime and a range of investment incentives
including tax exemptions and customs duty exemptions.
Over the
past decade it has also made significant investments in
business-critical infrastructure such as railways, ports, bridges,
and roads.
Angola's economic profile has improved significantly over
recent years, with the country's public debt falling from 131% of
gross domestic product in 2020 to 66% in 2022. The IMF has
projected that the economy will grow by 3.5% in 2023.
Angola's annual inflation rate slowed further to a seven
year low of 10.8% in Q1 2023 and marks the 14th consecutive decline
in headline inflation, amid a stable currency.
Following
an upgrade by Moody's in late 2021, all three major rating agencies
raised their credit assessment of the country's sovereign debt in
2022, with Fitch and Moody's upgrading the country outlook from
neutral to stable in the second half of the year.
The
information contained within this announcement is considered by the
Company to constitute inside information as stipulated under the
Market Abuse Regulations (EU) No.596/2014. Upon the publication of
this announcement via a Regulatory Information Service, this inside
information will be considered to be in the public domain. The
person responsible for arranging for the release of this
announcement on behalf of the Company is
Paul Atherley,
Chairman.
-
ENDS -
For
further information, please contact:
Shareholder/analyst
enquiries:
Pensana
Plc
Paul Atherley, Chairman IR@pensana.co.uk
Tim George, Chief Executive Officer
Rob Kaplan, Chief Financial Officer