Afreximbank picked to raise US$143m for Zimbabwe lithium mine, commits US$75m to project

The Africa Export-Import Bank (Afreximbank) is to arrange and manage a US$143 million project finance debt facility for Prospect Resources, and has agreed to fund and hold US$75 million of the arrangement to fund development of Zimbabwe’s Arcadia lithium mine.

The parties have also agreed a non-binding indicative debt facility term sheet, Prospect said in a notice on the Australian Stock Exchange on Tuesday.

Prospect said the appointment of Afreximbank was as “a critical milestone” in the financing of the Arcadia lithium project, expected to go into development in 2020. The parties will now undertake further detailed due diligence and negotiate the final agreements. Execution of the facility agreements remains subject to Afreximbank’s further due diligence and credit approvals and drawdown will be subject to satisfaction of various conditions of the agreements.

“We are very pleased to have agreed this mandate with Afreximbank, who have significant experience lending into Zimbabwe. The Company’s Arcadia lithium project is expected to be the first African lithium mine financed by Afreximbank and the first African lithium mine to attract debt finance,” said Prospect Resource Executive Chairman, Hugh Warner.

Development phase

The Afrex facility adds to a series of steps taken by Prospect over recent months to prepare for development.

To guarantee a market for its future lithium output, Prospect has signed offtake agreements with China’s Sinomine and, last week, entered into an MoU with Uranium One, the Canada-based unit of Russia’s Rosatom, that could see the miner take up a stake in Prospect and buy at least 51% of the lithium from Arcadia mine.

For power supply, Prospect announced Monday that it had signed a secure power supply agreement with power utility ZESA, starting in January 2020. The three-year agreement is subject to automatic renewal.

Prospect’s Managing Director, Sam Hosack, said the company is also exploring secondary sources of power, including a possible solar farm. In August, Prospect signed an MoU with African Continental Minerals (ACM) for the supply of 20MW of power to Arcadia from ACM’s planned coalbed methane gas project in the Midlands.

Prospect has an ore reserve of 37.4 million tonnes, sufficient for a mine life of 15.5 years.

An updated definitive feasibility study showed the project would deliver average annual earnings before interest, taxes, depreciation and amortisation of $US168 million for the first five years. Capital expenditure is at $US162 million with a payback period of 18 months expected.

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