TORONTO (miningweekly.com) – Toronto-based MagIndustries is in the late stages of arranging the debt finance portion for its Kouilou potash project, in the Republic of Congo (ROC), and hopes to finalise terms with its lenders in the next couple of months, CFO Jeff Swinoga said on Friday.

The most recent estimate of all-in capital and financing costs for the 600 000-t/y operation was $1,1-billion, of which 70% will likely be funded through debt.

MagIndustries had another $91,5-million on hand at year-end, and will seek to raise around $130-million to $180-million itself.

The debt negotiations are under way with a consortium of about ten development finance institutions, export credit agencies and commercial lenders.

MagIndustries has been working with financial adviser BNP Paribas on raising the debt for more than two years, and is now reaching the “tail end” of the process, Swinoga said on a conference call.

The company hopes to finalise the terms soon and then to reach financial close by the end of the northern hemisphere summer.

Separately, Morgan Stanley has been engaged to help with the planned capital raising, and this process is also under way.

It is likely that the firm would prefer to sell a stake in the project itself, rather than shares at a company level, because it would probably get a better price if potential investors are focused on the value offered by the potash project, rather than the publicly traded share price, said CEO William Burton.

Preconstruction work began at Kouilou in October 2008, but full construction of the production facility is only expected to begin once both the debt and equity financing is in place, he said.

The facility is scheduled to start production by the end of 2011, with full production targeted by mid-2012. 

MagIndustries will use solution mining technology, which produces potash-rich brine, which will be treated in a crystallisation plant to produce granular and standard grade potash fertilisers for export to South America, South Africa, South Asia and Europe.

In 2008, the company completed an independent feasibility study indicating proven and probable reserves of 33,5-million tons of potassium chloride confirming a reserve life of more than 54 years at a projected production rate of 600 000 t/y.

MagIndustries' local subsidiary has also signed a 25-year year potash investment agreement with the government of the Republic of Congo, which grants it exclusive rights for the development of the project and all fiscal aspects of its operations.

The firm also has an offtake agreement in place with Switzerland’s Ameropa AG for the marketing and sale of 100% of the first phase of the potash production, as well as a second phase, if and when, additional capacity is completed.

MagIndustries also has forestry and wood-chip operations in the ROC, and hydroelectric assets in the Democratic Republic of Congo.

The group also plans to study the feasibility of a magnesium plant adjecent to the Kouilou potash facility.