MRG Metals, listed on the ASX (Australian Stock Exchange), has entered into a binding joint venture (JV) agreement with Chinese investment companies, namely Sinowin Lithium Mineral and Sinowin Lithium Cobalt (SLC) to develop heavy sands projects in the Mozambique Corridor, including the Central and Southern Corridor, as well as other heavy mineral sands (HMS – Heavy Metal Sands) projects in Mozambique, the news portal Engineering News reported on Thursday 13 June.
According to the agency’s explanation, under the terms of the JV agreement, which was announced on 12 June, MRG will be free to make all capital and operating expenditures until production reaches 440,000 tonnes per year (t/y).
Initially, the mining company will hold a 30% stake in the JV during the start-up phase with 110,000 tonnes per year of concentrate production. This stake will decrease to 20% as production increases to 440,000 tonnes per year.
Prior to the binding agreement, MRG and SLC had signed a non-binding memorandum of understanding (MoU) on 6 March. Subsequently, SLC sent geological, construction and design teams to Mozambique in April to carry out due diligence and begin design work.
Engineering News writes that the due diligence was successfully completed in early May, and the parties worked collaboratively to finalise the formal JV agreement, ensuring that it was aligned with the terms of the non-binding MoU. “SLC brings significant mining expertise and capital capacity following its successful investment in the Moblan lithium mine and has been pursuing new development opportunities with even greater scope and upside to replicate this success,” said MRG chairman Andrew van der Zwan.
Heavy sands
He pointed out that MRG’s journey has been a long one, but we have remained focused on advancing the ‘Corridor Sands’ projects, which offer a resource capacity of several decades and an exceptional infrastructure base, including access to water, electricity, labour and, above all, proximity to the port.
“We anticipate that operating costs after development will be in the top quartile of low-cost production worldwide. The high base grade will ensure a low-value concentrate operation. An operation that our partner is well placed to optimise, given its relationships with downstream processors in mainland China. The free nature of the project’s financing from this point on is an important consideration for shareholders,” said the source.
To support the company’s operations, SLC will make an initial payment of five million meticals (80,000 dollars) over two months. This includes 948,000 (15,000 dollars) a month for MRG’s management and around 1.5 million (25,000 dollars) a month for costs in the country. These funds will help obtain mining licences and develop the project.
Following the creation of the JV company, SLC will make an immediate initial investment of 189 million meticals (three million dollars), followed by a further 189 million meticals (three million dollars) when the initial amount is utilised. This funding is intended to advance the mine’s approvals, design and economic analysis to the construction phase.
The website points out that SLC and MRG have been accelerating the feasibility and design plans for the mine in order to update the mining licence applications. A feasibility study is nearing completion and will be finalised soon. The JV company, based in Hong Kong, will be formalised in the coming weeks.
Heavy sands exploration mine
The JV’s capital structure specifies that, after receiving the first 189 million meticals (three million dollars) to 379.2 million meticals (six million dollars) in working capital financing, SLC will hold 70 per cent of the JV’s capital, while MRG will hold 30 per cent. The company will own the Central and Southern Corridor through the ownership of Mozambique’s holding companies. Phase 1 of the JV will be achieved after reaching 110 tonnes per year of concentrate production within 21 months of receiving the mining licences, with the benefit of adding the Northern Corridor to the JV.
Phase 2, the agency explains, which involves 220,000 tonnes per year of concentrate production, will be achieved within two years of Phase 1, increasing SLC’s capital to 75% and reducing MRG’s to 25%. The third phase, with concentrate production of 440,000 tonnes per year, will be completed within five years of the first phase, increasing SLC’s stake to 80% and reducing MRG’s stake to 20%.
SLC undertakes to invest all the funds necessary to develop the initial mining operation up to an annual concentrate production of 440,000 tonnes. Any further expansion will be financed by the JV, ensuring that MRG’s capital is not diluted below 20 per cent. The JV is expected to have the financial capacity to support this expansion or obtain loan financing if necessary.
The main terms of the purchase agreement designate SLC as the buyer of all HMS products from the initial Corridor Sands project. The purchase price will be set with reference to export prices for HMS of comparable quality processed by other companies in Mozambique.
An independent review mechanism, accepted by both parties, will be co-ordinated. In addition, the JV company will pay a 5% sales commission for the purchase agreement. “Our partner has already spent considerable time and money in good faith during the due diligence period and the final negotiations of the JV structure. The due diligence was extremely thorough and included the involvement of project engineers and construction consultants,” explained Andrew van der Zwan, adding that “this work will enable the JV to resubmit the proposed development and mining feasibility plan and set an internal target of first production by the end of 2025.”
“The continued funding of the majority of our national and administrative expenses during this period is testament to the effective working relationship we have built over the last four months and recognition of the significant role our people will play in taking this project to the construction phase,” he concluded.
