Andromeda Metals closes in on debt funding to progress Great White kaolin project to FID

Andromeda Metals is in talks to secure a $75m debt financing facility to progress the Great White Project towards a final investment decision.

Andromeda Metals is moving to secure $75m in debt financing for its Great White Project. Pic: Getty Images

• Andromeda Metals in exclusive negotiations for $75m debt facility to develop Great White

• Project has all approvals, a significant ore reserve and a bankable feasibility study in place

• Debt facility represents significant progress in funding for Stage 1A+ to support a final investment decision

Special Report: Kaolin-focused Andromeda Metals has started exclusive negotiations with Merricks Capital for a $75m debt financing facility to advance the Stage 1A+ development of its Great White Project in South Australia.

The development ready project has most of the pieces needed to proceed with the first stage.

It has an ore reserve of 15.1Mt that is sufficient to support a 28-year mine life and a bankable feasibility study estimating it could generate a net present value and internal rate of return of $763m and 43% respectively.

Capex is estimated at $194m for a three-stage development that can supply up to 330,000 wet metric tonnes of product per annum.

Andromeda Metals (ASX:ADN) has all key approvals in place to start construction and has 100% of the planned capacity committed under four binding offtake agreements from the third year of production.

Debt financing

The entry into exclusive negotiations with Merricks Capital follows a phase of detailed due diligence and represents significant progress in the funding process for the 100,000wmtpa Stage 1A+ development for the GWP, with estimations at $84m.

The exclusive negotiations with Merricks Capital are for a debt project financing facility with a limit of up to A$75 million, to support a final investment decision for Stage 1A+.

Both parties will now enter the final phase of due diligence and negotiations towards agreeing terms and conditions, and securing final approvals for the debt financing to support a final investment decision for Stage 1A+.

Merricks is a leading Australian alternatives investment manager and hard-asset investment specialist that has managed over $8 billion in global investments since its inception in 2007.

“The entry into exclusive negotiations with Merricks Capital, following detailed due diligence investigations, represents significant progress for the financing of Stage 1A+,” Andromeda acting CEO Sarah Clarke said.

“The company continues to make steady progress in its Stage 1A+ project funding process to support a final investment decision for the Great White Project.”

ADN was previously awarded an Advance Finding by AusIndustry which enables it to claim refundable tax offsets or cash rebates for 43.5% of eligible Stage 1A+ expenditure of up to ~$26m.

An initial tax rebate of $2.34m was received by ADN in January this year.

Focus on funding

MST Access, which penned a 14c valuation on Andromeda at the end of January this year, said securing funding would be the main catalyst for a material re-rating of the company.

It noted then that ADN’s development-ready GWP kaolin deposit had exceptional mineral characteristics and low-risk mining and processing.

The GWP products target growing premium markets such as ceramic tiles, porcelain tableware and cement additives. This and its long mine life in the Tier 1 jurisdiction of South Australia positions the company to generate long-term, high-margin cash flow and create substantial value.

MST added that once funded, key catalysts to value creation included starting construction, signing additional offtake agreements for project expansion, commencing production and ramping up to full capacity.

At full capacity and using the company’s DFS pricing scenarios, it expects the GWP to generate ~$160m in EBITDA with margins of over 50%.

It added that it considered ADN to be significantly undervalued with value upside as it funded, constructed and started production at the GWP.

This article was developed in collaboration with Andromeda Metals, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

Originally published as Andromeda Metals closes in on debt funding to progress Great White kaolin project to FID