Trafigura Group said it has alongside Galena Asset Management, Sampo plc agreed on a funding package to support Terrafame Ltd.
Trafigura Group said the EUR 250 million funding package will be used to finalize the ramp-up of Terrafame. The new funding package now agreed on is a significant factor enabling Terrafame to move from established industrial operations to investing in new business opportunities associated with the electric vehicle battery segment.
“After a successful ramp-up of Terrafame’s operations, the company is strongly moving ahead to a phase of established industrial operations. Part of this is exploring new investment opportunities such as upgrading of the mixed nickel-cobalt sulphide product to two separate nickel and cobalt sulphate products. After a EUR 250 million funding package by Trafigura, Galena and Sampo in February 2017 we are delighted to see our co-owners’ continuing commitment in the form of a new USD 200 million funding package that will support Terrafame’s future growth investments,” says Janne Känkänen, Chairman of the Board of Terrafame Group Ltd.
“The ramp-up of Terrafame’s mine has reached the objectives set when the operations started in August 2015. The company has met its key production targets, and costs have stayed within budget. The environmental situation at the mine is stable. Bioheapleaching is working according to expectations and Terrafame is ready for new opportunities,” Känkänen continues.
“Terrafame’s continued strong performance is the result of the intense ramp-up work by the company’s management and employees during the last two years. During the ramp-up, we have also explored new opportunities to widen Terrafame’s product portfolio and upgrade our nickel product. Nickel upgrade options have included the production of NiFe alloys for stainless steel production and nickel and cobalt sulphates for electric vehicle battery applications. Both projects are being advanced to feasibility study stage. Based on our conclusions, the nickel and cobalt sulphates project seems to be the most promising of these options. We will make a formal investment decision related to upgrading nickel product by next spring,” says Lauri Ratia, Terrafame’s Chairman of the Board.
“We’ve been very impressed by both the quality of the Terrafame management team and how the mine is performing,” says Maximilian Tomei, CEO of Galena Asset Management. “Terrafame is now ready for a second investment phase which will benefit from the rapid development of the electric vehicle industry. We can anticipate significant growth in future demand for nickel and cobalt sulphates used in battery production for electric vehicles and can capitalize on this demand by further enhancing Terrafame’s expertise and production capabilities. This will position the company as an essential north European provider of feed to the battery industry,” Tomei concludes.
The equity investments are made on the same share price as in the financial transaction closed in February 2017. Hence, the pre-transaction valuation of Terrafame is EUR 481.8 million.
The equity investment gives Galena also option rights to subscribe to Terrafame’s shares with USD 100 million. The subscription price carries a premium of 10% above the current subscription price.
The maturity of the loan facilities is 5.5 years. The loans have a 1.5% drawdown fee payable in shares of Terrafame.
Loan facilities give Galena and Sampo option rights to subscribe to Terrafame’s shares with USD 75 million and USD 25 million respectively, and with the sum of accrued interests. The agreed subscription price carries a premium of 15% above the current subscription price.
Trafigura and Terrafame have extended the current offtake agreement concerning the zinc sulphide precipitates and have negotiated new commercial arrangements for future nickel and cobalt sulphate products. In accordance with the extended offtake agreement, Trafigura will buy 80% of the zinc sulphide precipitates produced by Terrafame until the end of 2027. In the commercial arrangement for new nickel and cobalt products, Trafigura will market 100% of these products until the end of 2027. The commercial conditions of the arrangement follow the market practices generally applied in the markets. The offtake agreement for 100% of nickel and cobalt sulphides continues in force.
The validity period of the EUR 50 million stand-by facility committed by Terrafame Group as a part of the previous funding package in February 2017 has been extended until the end of year 2021.
Prior to the new arrangement, Terrafame’s shareholder base consisted of Terrafame Group with a shareholding of 84.0%, Galena with a 15.9% share and Sampo with a 0.1% share. Since the funding arrangement agreed on in February 2017, Galena and Sampo have chosen to receive interest payments on the loan facility in Terrafame’s shares.
After the new arrangement i.e. USD 100 million equity investment and payment of drawdown fees of the loan facilities, Terrafame Group’s shareholding in Terrafame will be 71.2%, Galena’s 28.7% and Sampo’s 0.1%. As a consequence of the arrangement signed and executed today, Terrafame Group’s shareholding in Terrafame can decrease to a minimum threshold of 50.1% in the future, if option rights are used and accrued interests are paid in shares.