EQUINOX Minerals has bucked recent trends amid the credit freeze and secured $US80 billion ($103 billion) in debt for its Lumwana copper project in Zambia, underpinning confidence in the project and sparking speculation the company could fall prey to the likes of Rio Tinto.
The Lumwana project is due to come on line at the end of the year and is expected to produce 172,000 tonnes of copper a year from 2009 and run for 37 years.
Credit Suisse analyst Julian McCormack said that the debt facility was a vote of confidence in the project and recent slumping share markets made the company a target for bigger players looking to boost copper production.
“We view this as a significant validation of the project and the people managing it,” Mr McCormack said in a note to clients at the weekend.
“You cannot build a Lumwana-sized project for what it will cost to buy Equinox today,” he said.
Mr McCormack pointed to recent reports quoting Rio Tinto management as saying the miner wanted to buy copper producers of around 200,000 tonnes a year with long mine lives.
“Lumwana, which will be in production this decade, is the only asset anywhere on the globe that matches this description,” he said.
Perth-based Equinox, which is listed on the Australian and Toronto stock exchanges, has a market value of $1.63 billion.
Its shares have slumped more than 50 per cent this year.
The $US80 million loan facility is underwritten by Standard Bank and Standard Chartered Bank and will be provided by members of Equinox’s existing Lumwana banking syndicate.
The facility will let the company meet extra working capital requirements that resulted from start-up delays after an electrical fire in July.
Equinox also renegotiated the repayment schedule for some elements of the existing $US583.8 million project finance debt facilities.
“The new loan facility is evidence of the strong confidence our banking syndicate has in the project,” Equinox chief executive Craig Williams said.
“Equinox and its shareholders can now be afforded, during this unprecedented period of market volatility, the necessary levels of stability and liquidity required to expeditiously move the project into copper-concentrate production and deliver further shareholder value.”
Rio Tinto copper chief executive Bret Clayton said last week that his company was “scouring opportunities” as the credit crisis made it harder for juniors to raise money.
The Australian