CANADA-based Cobalt 27 Capital Corp. has acquired a share of production from the Ramu Nickel-Cobalt Mine near Madang from Highlands Pacific Limited for US$113 million.
The deal to acquire a share in the world’s first producing cobalt-nickel stream also provides it with equity in the MCC operated world-class Ramu Nickel-Cobalt Mine.
Cobalt 27 has agreed to acquire the right to purchase 55.0% of Highland’s attributable share of the payable cobalt metal and 27.5% of its attributable share of the payable nickel metal produced at Ramu, for the life of mine, in exchange for a US$113 million (C$145 million) upfront cash deposit payable to Highlands.
Highlands currently holds an effective 8.56% ownership interest in Ramu. However, Highlands will use proceeds from the deal with Cobalt 27 to increase its effective ownership interest in Ramu to 11.3% through the repayment of its share of outstanding Ramu construction and development loans.
Cobalt 27’s Ramu Cobalt Nickel Stream will be secured by a first-priority ranking pledge over Highlands’ shares in Highlands’ wholly-owned subsidiary Ramu Nickel Ltd (RNL) and a guarantee by Highlands.
Cobalt 27 has also agreed to complete a strategic equity investment in the Common Shares of Highlands, which will result in the company owning an approximate 13% pro forma interest in Highlands).
Cobalt 27 will also have the right to appoint a member to Highlands’ board of directors, and accordingly, concurrent with the close of the Equity Investment, Anthony Milewski, chairman and CEO of Cobalt 27, will be appointed to the board of directors of Highlands.
“This transaction represents the fulfillment of our promise to investors to deliver a cash flowing cobalt stream on a world-class mine,” said Anthony Milewski, chairman of Cobalt 27 Capital Corp.
“Ramu is a large world-class, high-margin and long-life asset which we view as the ideal candidate for our inaugural stream. We believe the exposure to both cobalt and nickel, another key battery metal, will yield significant returns to our investors as electric vehicles begin to change our society in the coming years.
“Our partnership with Highlands will help Cobalt 27 continue to grow its position as the leader in battery metal streaming,” Mr Milewski, said.
Cobalt 27 and Highlands have agreed that the proceeds from the US$113 million stream are to be used by Highlands to fund repayment of Highlands’ attributable Ramu partner loans.
In addition to the MPA, Cobalt 27 has entered into advanced discussions with two local PNG stakeholders which own an equity interest in Ramu to negotiate a US$87 million stream agreement on the same terms as the MPA with a proportionate metal stream based on their attributable aggregate interest in Ramu.
The PNG Government-backed MRDC currently holds a collective 6.44% interest in Ramu, which would increase to 8.7% through the repayment of their proportionate share of outstanding Ramu construction and development loans.
In order to further strengthen the partnership between Cobalt 27 and Highlands, Craig Lennon, CEO of Highlands Pacific, has agreed to join Cobalt 27’s Advisory Board. Mr Lennon has been with Highlands for 17 years and is an expert in the region.
Ramu, located near Madang on the north coast of PNG, is majority-owned and operated by China’s MCC which holds a 67.02% stake in MCC-JJJ Mining Development Company Limited which owns 100% of MCC Ramu NiCo Ltd.
The Government of PNG and local landowners own a 6.44% stake in Ramu through MRDC. Following repayment of the Ramu construction and development loans by Highlands, MCC – Ramu’s ownership will decrease to 82.3%.
The Ramu mine was financed and constructed by MCC for US$2.1 billion which, at the time, was China’s largest overseas mining investment. MCC is listed on the Hong Kong Stock Exchange and Shanghai Stock Exchange with a market capitalization of approximately US$12 billion.
MCC’s interest in Ramu is supported by a consortium of three of the largest enterprises in the Chinese nickel and stainless steel industry, namely Jinchuan Group Limited, Jilin Jien Nickel Industry Limited, and Jiuquan Iron & Steel Limited.