Monto Minerals is in the process of sourcing around $22 million in funding for infrastructure, including $6.5m to construct a power line to the Goondicum mine site. $15.5m in funding also required replacing cash which collateralises guarantees for infrastructure until bank guarantees can be secured against the project. Monto Chairman Peter Slaughter said building the power line themselves would result in significant operating cost benefits over the life of the project and will reduce the level of financial guarantees required."The power line will also be completed sooner, thus reducing the need for expensive diesel fuelled power generation during the early stages of the projects production," Mr Slaughter said.
Construction of the power line by an independent contractor will add about $6.5 million to the capital expenditure of the project. As part of the original project plan a number of entities were to construct infrastructure for water, transport and power which will be supplied to the company in return for user charges.
Monto Minerals has not been able to satisfy bank credit requirements and provide a sufficient level of assurance on contracted and potential sales. This is predominantly due to the nature of the Goondicum mine products, which dictate that it is not possible to conclude contractual commitments from potential customers until a full-scale operation is established, CEO Geoffrey Moore said. Accordingly, cash collateral has been required, he said. Monto Minerals has revisited all parties who had provided conditional purchase commitments and they have confirmed their intentions to sign off-take agreements for about 45 per cent of the first year's planned production of ilmenite, apatite and feldspar, with a similar tonnage committed for the second year, rising to 55-60 per cent if initial estimated sales of titanomagnetite are secured in 2007.
It is anticipated that once these current strong indications of potential sales are converted into contracts, Monto Minerals will be in a position to seek guarantees from banks without cash collateral. Funds currently being used for this purpose will then be released for use as working or expansion capital in Monto's business or as a return to shareholders, Mr Moore said.
The company is discussing a range of options with its UK and Australian advisers in respect of the size and structure of the proposed fundraising. Further announcements, in respect of these negotiations and regarding the fundraising, which it is intended to complete within two months, will be made in time, Mr Moore said.
The company also announced that Philip Holbeche resigned effective from the close of business, December 29, from his position as non-executive Director due to the demands of his other business interests. The board acknowledges the contribution that Mr Holbeche has made to the company during 2006, and in particular the successful Initial Public Offering of Monto shares to the London AIM market. The company intends to appoint another UK based independent director and expects to make an announcement in due course.
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