Sable enters supply agreement for Lapon plant to accelerate production ramp-up
JSE-listed Sable Exploration and Mining has reported that its wholly-owned subsidiary Lapon Plant has entered into a comprehensive operator, ore supply and processing agreement with South African mining and contracting company Daemaneng Minerals, with effect from October 26.
Lapon is the owner of a partially built beneficiation plant used to crush and mill, as well as a magnetic separation plant capable of processing magnetite ore and producing dense media separation- (DMS-) grade magnetite.
Under the agreement, Sable says Daemaneng will act as both the exclusive operator of the plant and the sole supplier of the product, assuming full responsibility for all operational, financial and managerial functions of the plant.
Daemaneng will fund 100% of all capital expenditure and operational expenditure associated with the optimisation, expansion and ongoing operation of the plant.
Sable says this transaction forms a core part of its strategy to de-risk operations, deliver near-term production and achieve early profitability under a fully funded operational model.
The company says it enables positive cash flow generation at the group level and brings the technical and operational depth needed to ensure the long-term success of the plant as well as Sable's broader strategic objectives.
Within three months of the effective date, Sable says Daemaneng will ensure that the plant can produce 5 000 t of product and within 20 business days thereafter, deliver to Lapon a written expansion plan to expand the plant to achieve a production capacity of 15 000 t a month of product.
Daemaneng is also in charge of all marketing and sales of DMS-grade magnetite or any other product that can be produced by Lapon.
Sable says a profit-sharing mechanism is included for profit beyond an agreed base price.
The company explains that, as the total consideration is not subject to a maximum, the transaction is a category one transaction and requires shareholders' approval.
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