PERTH (miningweekly.com) – ASX-listed Elmore on Thursday announced A$45-million in new funding, including a A$32.5-million offtake agreement and a A$12.5-million capital raise.

The contract mineral processing company, which also owns the Peko magnetite mine in the Northern Territory, has inked a term sheet for a minimum A$32.5-million magnetite pre-payment and offtake agreement with its current offtake partner Royal Advance.

The term sheet sets out the key commercial terms for an offtake agreement over the magnetite iron-ore contained within the tailings stockpile at Peko, which is estimated to be operational for six-and-a-half years.

The pre-payment will be available for drawdown in a single tranche, and the loan will attract an interest rate of 9% a year, with a three-year term from drawdown. Royal Advance will purchase all of the magnetite produced from the tailings operation and will have first right of refusal to agree to long-term offtake arrangements for copper and cobalt products from the tailings operation, which is expected to be in production by year-end.

A minimum shipment threshold will apply.

The completion of the pre-payment agreement is subject to a site visit by Royal Advance, and final documentation.

Additionally, Elmore on Thursday also announced a capital raise of A$12.5-million, with the company to issue 1.66-billion shares at a price of 7.5c each. Investors will also receive one option for every ten shares subscribed for, subject to shareholder approval.

Of the A$12.5-million raised, A$6.2-million will be advanced upfront as investor loans and a further A$1.5-million placement will be settled within two business days of the company receiving shareholder approval, with a A$1.5-million bridge loan provided by another investor. In addition, a further A$4.8-million of debt conversion will be settled via the conversion of existing debts owed by Elmore, also within two business days of the company receiving shareholder and regulatory approval.

“This financing is transformative for the company, providing long-term funding to repay the company’s vendor loan agreement and secures the support of a multibillion-dollar corporate partner for the life of the tailings operation, as well as new investors who we welcome to Elmore,” said Elmore MD David Mendelawitz.

“The significant reduction in our net debt and strengthening of our balance sheet will assist Elmore to make the investments that the Peko mine needs, to build upon the base production level we have already achieved, taking more advantage of the great potential we see at the operation.”