Highlands Pacific has secured a funding and strategic partnership with Canadian battery metals company, Cobalt 27 Capital, based on the Ramu nickel-cobalt mine in Papua New Guinea.
The $2.1 billion Ramu mine, which has been operating for more than five years, is considered one of the largest producers of cobalt outside of the Democratic Republic of the Congo. In 2017, Ramu’s output reached 34,666t of nickel and 3308t of cobalt in concentrate.
Highlands Pacific’s agreements with Cobalt 27 include a streaming funding arrangement, a $15 million private placement and a strategic relationship.
Under the terms of the streaming agreement, Cobalt 27 subsidiary, Electric Metals Streaming, will pay Highlands an upfront $US113 million ($149 million) deposit to secure a 55 per cent share of cobalt production and 27.5 per cent share of nickel production from the Ramu mine.
Electric Metals will also make ongoing volume-based payments to Highlands of $US1/lb of nickel and $US4/lb of cobalt for product it is entitled to under the streaming agreement.
Highlands has an 8.56 per cent interest in the Ramu project, which is operated under a joint venture with a Metallurgical Corp of China (MCC) subsidiary (85 per cent) and the PNG Minerals Resources Development Company (6.44 per cent).
Brisbane-based Highlands plans to use the deposit to repay loans from MCC for the construction and operation of the Ramu mine. By repaying these loans Highlands’ interest in Ramu will increase to 11.3 per cent.
Highlands also retains the right to purchase up to 13.27 per cent in the cobalt-nickel stream from Cobalt 27 for up to $15 million, giving it exposure to the potential upside in metal prices driven by demand for battery technology.
Cobalt 27 will also invest $15 million in Highlands through a private placement by taking 142.5 million shares in the company for 10.5 cents each.
Highlands managing director Craig Lennon described the agreements as a fundamental transformation for the company.
“Highlands will emerge from the deal in a much stronger financial position, debt free with enhanced access to cashflows from the Ramu mine,” Lennon said.
“Furthermore, it creates a valuable strategic partnership with Cobalt 27, which is a highly innovative and entrepreneurial company that has the potential to offer Highlands an opportunity to be a partner in exciting, value creating transaction in the future.”
Highlands is targeting financial close of the streaming agreement by June 30.