Nov 2 2006
Dynatec Corporation is pleased to announce the signing of a shareholders agreement for the Ambatovy Nickel Project, under which Dynatec has been appointed Project operator and will retain a 40% ownership interest. A 27.5% interest in the Project will be held by each of Sumitomo Corporation (“Sumitomo”) and Korea Resources Corporation (“KORES”) (leading a consortium of Korean enterprises including Daewoo International Corporation, Keangnam Enterprises Ltd. and STX Corporation). SNC-Lavalin Inc. (“SNC-Lavalin”) has agreed to acquire a 5% interest in Ambatovy coincident with the closing of the project debt financing. Dynatec will receive US$852 million of financial support from its partners, positioning it to fund its equity requirements for the Project and to meet a significant portion of its guarantee obligations for project debt financing. Ambatovy is among the largest nickel projects under development in the world, with annual design capacity of 60,000 tonnes of nickel and 5,600 tonnes of cobalt. It is anticipated that Ambatovy will be placed near the bottom of the industry cost curve based on expected low nickel production costs.
Dynatec also announced today that the Ambatovy partners have received a letter of intent from The Export-Import Bank of Korea (“Korea Eximbank”) to provide US$650 million of project debt. The Ambatovy partners are continuing to advance discussions with other lenders, including the Japan Bank for International Cooperation, Export Development Canada, the European Investment Bank and the African Development Bank, with a view to concluding project debt financing arrangements for 50%-60% of Ambatovy’s total funding requirements by early next year.
Bruce V. Walter, President and Chief Executive Officer of Dynatec, commented: “We are delighted to welcome KORES and SNC-Lavalin to the Ambatovy partnership. With strong equity partners now in place, we are on track to move forward with the project debt financing and to move the Project into construction by mid-2007. With annual cash flows expected to exceed half a billion dollars, based on 25-year average nickel and cobalt prices(1), we are confident that Ambatovy will create significant long-term value for Dynatec and its partners.”
The Ambatovy sponsor group brings together a strong combination of technology, operations, project execution and financial capabilities with which to drive the Project forward. Dynatec will apply its extensive hydrometallurgical experience as Project operator. Sumitomo and KORES bring considerable large project experience, marketing expertise and financial capability. SNC-Lavalin brings its leading expertise in the engineering and construction of major mining projects and substantial knowledge of Ambatovy, having coordinated the Project’s feasibility study.
Under the terms of the shareholders agreement, Dynatec will retain a 40% interest in the Project. Dynatec will transfer a 27.5% interest to KORES, a state-owned corporation of the Government of the Republic of Korea with a mandate to pursue resource development opportunities to supply Korea’s expanding industrial economy. Dynatec will also transfer an additional 2.5% interest to Sumitomo, increasing Sumitomo’s ownership from 25.0% to 27.5%. Dynatec will retain a 45% interest until the closing of Ambatovy’s project debt financing at which time it will transfer a 5% interest to SNC-Lavalin.
KORES will have the right and obligation to purchase half of the Project’s quarterly nickel production (to a maximum of 7,500 tonnes per quarter) during each of the first 15 years of production. In addition, as support for the project debt financing, Sumitomo has agreed to purchase any portion of the nickel production not sold to end-consumers up to a maximum of 30,000 tonnes per annum during the first 15 years.
Certification under Madagascar’s Large Mining Investment Act (LGIM) and environmental assessment approval, the key regulatory approvals required to commence Project construction, are expected to be received by the first quarter of 2007.