8 July 2009 - London: European Nickel PLC ("European Nickel" or the
"Company") (AIM, PLUS: ENK) is pleased to announce it has signed an
agreement (the "Termination Agreement") with BHP Billiton pursuant to
which BHP Billiton has agreed to release the Company from all of its
obligations under the off-take agreement announced in June 2006 (the
"BHP Off-take") in relation to the Company's �aldag project in
Turkey. As previously announced and in accordance with the heads of
agreement (the "Off-take Heads") signed with Jiangxi Rare Earth and
Rare Metals Tungsten Group Company Limited ("JXTC") in December 2008,
following signature of the Termination Agreement European Nickel
intends to enter into a new off-take agreement with JXTC.
The Company has also signed a US$4 million Facility Agreement with
Endeavour Financial Corporation ("Endeavour") to provide bridge loan
finance pending completion of the proposed US$20 million equity
investment by JXTC in �aldag.
Termination Agreement
Pursuant to the Termination Agreement, BHP Billiton has agreed to
terminate its entire off-take contract with European Nickel with
immediate effect. In accordance with the Off-take Heads which fixed
the terms of the off-take, the directors of the Company anticipate
that the negotiations with JXTC will lead to a new off-take agreement
whereby JXTC will agree to take 100% of �aldag's mixed hydroxide
product. The successful conclusion of negotiations with BHP Billiton
is an important step towards finalising the acquisition by JXTC of a
20% equity interest in �aldag and the progression of the debt finance
facility being arranged by China Tianchen Engineering Company.
Originally, only 50% of �aldag's off-take was going to be sold to
JXTC but this has been increased to 100% by mutual agreement to
facilitate the 100% debt financing of the project from a Chinese
bank.
The terms of the termination of the BHP Off-take are a payment of
US$10 million on first drawdown of the project finance facility and a
further 24 monthly payments of US$1 million, starting once nickel
output has reached 50% of the �aldag plant's design specification of
20,400 tonnes per annum of contained nickel. The maximum funding
cost of the �aldag project has not increased as a result of the
payments due pursuant to the Termination Agreement. The initial
payment of US$10 million to BHP Billiton is more than offset by the
reduced current market prices of consumables at the �aldag project,
particularly sulphuric acid where the price has dropped very
significantly since the estimate used in the last announced project
evaluation (see press release dated 19 February 2009). The monthly
payments start after maximum drawdown and are treated as operating
costs.
The payment terms agreed in the Off-take Heads are confidential but
the overall impact of the Termination Agreement is beneficial for the
�aldag project and will assist the Company to complete the financing
of the project.
JXTC can now apply for approval from the Jiangxi Provincial
Government to invest US$20 million to acquire a 20% equity interest
in the �aldag project.
Facility Agreement
The Company has signed a bridge loan facility agreement (the
"Facility Agreement") with Endeavour for a US$4 million secured loan
facility (the "Loan") to provide bridge finance to the Company for
working capital until completion of the US$20 million equity
investment by JXTC in �aldag. The Loan is conditional on the
completion of certain conditions precedent.
Under the terms of the Facility Agreement, the Company has granted
Endeavour a three year option to purchase 800,000 ordinary shares in
the Company ("Shares") at a price of 6.644 pence per share. The
coupon on the Loan is 10% and the Loan is repayable on 20 October
2009, unless it is extended at mutual consent. A further three year
option to purchase 3,200,000 Shares will be granted to Endeavour on
drawdown of the Loan.
In addition, the Company has appointed Endeavour as financial adviser
for the US$350 million project financing of the �aldag project.
Simon Purkiss, Managing Director of European Nickel said, "Finalising
terms with BHP Billiton for the release of the off-take contract is
an important milestone as it now allows JXTC to move ahead with the
approval process for their investment in �aldag and for the next
stage in the application for the US$350 million of project financing
to commence.
JXTC have indicated the Jiangxi Provincial Government approval
process can now move forward and I am confident that we can progress
the conclusion of the US$20m share purchase and that the debt finance
will be completed by the end of the year. With the current timing,
we have taken the opportunity to arrange a loan facility to provide
additional resources for the coming period. We would like to thank
BHP Billiton for their support in the development of European Nickel
to date."
For more information, please visit www.enickel.co.uk or contact:
Simon Purkiss or Andrew Lindsay, European Nickel
Tel: +44 20 7290 3130
Mike Jones or Andrew Chubb, Canaccord Adams
Tel: +44 20 7050 6500
Alex Buck, BuckBias
Tel: +44 7932 740 452
About European Nickel
European Nickel (AIM, PLUS: ENK) is an emerging mid-tier nickel
laterite producer focused on growth. With over 1 million tonnes of
nickel resources and assets in Turkey, the Philippines and Albania,
European Nickel is targeting 50,000 tonnes of annual nickel
production within five years. The �aldag project in Turkey is the
Company's flagship asset with near-term production and will be the
world's first commercial scale nickel laterite heap leach operation.
Note to Editors:
Endeavour Financial Corporation (TSX: EDV) www.endeavourfinancial.com
Endeavour is an independent merchant banking company focused on the
global natural resources sector. The Corporation offers advisory
services in project, corporate and debt capital markets; equity
financings; mergers and acquisitions; and strategic business
development. Endeavour also provides equity and bridge loans in
support of clients, transactions, and other market opportunities.
Accessing its global industry networks, Endeavour creates and
launches new growth companies as both an advisor and investor.
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