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STREAMPLAY STUDIO LIMITED — Capital/Financing Update 2010
Jul 26, 2010
65841_rns_2010-07-26_942b84dc-e4a0-4604-94a6-7a36e248dab3.pdf
Capital/Financing Update
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27 July 2010
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TANTALUM PROJECT & MARKET UPDATE
ABU DABBAB PROJECT
Gippsland Limited ('Gippsland' or the 'Company') [ASX: GIP, FRA: GIX] provides the following update for the Abu Dabbab Tantalum-Tin Project in Egypt.
Gippsland has an Offtake Agreement with the German tantalum refiner HC Starck GmbH, whereby HC Starck has contracted to purchase 600,000 pounds per year of Abu Dabbab tantalum (in the form of tantalum pentoxide – Ta2O5) for a period of ten years. In August 2009, the Company advised the market that the original milestones under the Offtake Agreement had not been met. The Offtake Agreement has been extended to 31 December 2010.
The Company is presently in negotiation with HC Starck regarding revised terms of the Offtake Agreement to reflect the production of a synthetic tantalum concentrate ('SynCon') having a higher Ta2O5 content and therefore a higher value. HC Starck has stipulated that the SynCon is its preferred product for their tantalum refining process as it reduces transportation costs, consumption of processing reagents and the disposal of waste products whilst largely eliminating the need to dispose of wastes in specialised underground storage repositories in Germany.
Whilst these HC Starck discussions are in progress, the Company has also entered into discussions with other tantalum refiners.
The Company has previously advised the market that its proposed financing for the Abu Dabbab project with KfW-IPEX Bank GmbH was well advanced. Prior to the onset of the global financial crisis, the legal and technical due diligence had been largely completed by the bankers. A key outstanding part of the financing arrangement is the revised terms of the Offtake Agreement with HC Starck to take into account the delivery of the tantalum SynCon. The financing discussions await completion of negotiations with HC Starck, or other tantalum refiners.
The financing mandate with KfW was extended through to 31 December 2009; however it has not been formally extended further as to do so would incur a fee to Gippsland. Discussions with KfW are ongoing.
In November 2009, it was estimated that detailed engineering and construction would be commenced by 2010 with commissioning in 2012, however based upon the assumption that the HC Starck negotiations are finalised in the near future, commissioning is now expected to commence during the first quarter of 2013.
Your directors look forward to being able to provide further details of progress in the development of the Abu Dabbab Project in the near future.
CONFLICT MINERALS BILL
On 15 July 2010, the international tantalum market underwent a dramatic change with the passing of a ground-breaking new bill by the United States Senate, which will help to lift the curse of corruption and conflict from poor countries that are rich in oil and minerals by promoting greater public oversight and responsible trading practices. The sale of such conflict minerals has fuelled a 15-year war in the Democratic
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Republic of Congo ('DRC') that has been marked by a horrific epidemic of sexual violence which rebels have used as a weapon of war.
The war in DRC began after the 1994 genocide in neighbouring Rwanda, which sent streams of militiamen across the border. Congolese activists, UN experts and non-governmental groups such as Global Witness have expressed concern that armed Congolese groups are financing themselves with minerals such as tantalum, tin and tungsten. The minerals are extracted from remote DRC mines and smuggled to Rwanda and neighbouring countries. The DRC is the source of less than one-fifth of the world's tantalum, as well as smaller percentages of the other two minerals.
The US 'conflict minerals' law is the first of its kind in the world, requiring companies to use independent experts to certify whether their minerals are conflict-free.
Provisions in the Bill will require mining companies registered with the Securities and Exchange Commission to publicly disclose if they are sourcing conflict minerals from the DRC or adjoining countries. Companies will have to detail the measures they have taken to avoid sourcing these minerals from DRC armed groups. The bill also requires that all information disclosed be independently audited.
Following US President Obama's signing of the Bill, the US Secretary of State Hillary Clinton stated: "Last year in the Democratic Republic of Congo, I spoke out against the trade in 'conflict minerals' that has funded a cycle of conflict there that has left more than 5 million people dead since 1994, displaced countless more, and spawned an epidemic of sexual and gender-based violence.
President Obama has now signed into law a measure that will require corporations to publicly disclose what they are doing to ensure that their products don't contain these minerals. The DRC has formally expressed its support for this law and has thanked both the executive and legislative branches of our government. This is one of several steps we are taking to stop this illicit and deadly trade".
TANTALUM MARKET
The long predicted shortage in the global tantalum supply is now having a dramatic effect on the international tantalum market, with the spot market price increasing from approximately US$38 per pound in December 2009 to the present price of approximately US$80 per pound.
The shortage is expected to continue through to at least 2013 by which time Abu Dabbab is expected to largely satisfy demand with its initial production of in excess of 650,000 pounds of tantalum per year.
GERMAN SOURCING OF RAW MATERIALS
The effects of the emerging shortage in the global tantalum supply chain which is likely to be exacerbated by the passage of the Conflict Minerals Bill in the United States, appears to be raising concerns regarding security of supply. Abu Dabbab is well positioned to provide tantalum refiners with access to a long term source of conflict-free tantalum.
This uncertainty of supply is causing the German government concern as China gains increasing control over mineral resources in the African and South American continents. In a recent Cairo interview Herr Werner Hofbauer, President, Association of German Industry, expressed concern over China's influence in these areas through the acquisition of mines through state banks and government financial institutions.
The Abu Dabbab-Nuweibi Projects offer Germany a substantial long term buffer to the shrinking tantalum supply chain.
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ABOUT THE ABU DABBAB - NUWEIBI TANTALUM PROJECT
Through its 50% owned subsidiary Tantalum Egypt JSC, Gippsland Limited owns the 44.5 million tonne Abu Dabbab Tantalum Project and the nearby 98 million tonne Nuweibi Tantalum deposit.
Gippsland has completed a Definitive Feasibility Study for Abu Dabbab based upon a mill feed rate of 2 million tonnes per year producing in excess of 650,000 pounds of contained Ta2O5, which will make it the world's largest tantalum miner. The Abu Dabbab project will also produce approximately 1,530 tonnes of tin metal per year.
With a resource base in excess of 142.5 million tonnes, there is ample opportunity to increase production following commencement of operations scheduled for early 2013.
A detailed Environmental Impact Assessment (EIA) has been completed to World Bank standards.
The Directors consider that the Abu Dabbab and Nuweibi deposits place the Company in a unique and highly advantageous position in the global tantalum supply chain. The project has been described by a leading electronics analyst as a "mega project" which is crucial to the reliable long-term supply of the strategic metal to the electronics and aviation industries.
For further information, please contact:
Jack Telford Director – Chief Executive Officer Gippsland Limited T: +61 8 9340 6000
DJ Carmichael & Co Paul Covich / Rob Matthews
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T: +61 8 9263 5271
WH Ireland Limited (UK) John Molyneux / James Hughes
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T: +44 20 7220 1665 / +44 20 7220 1663
Note:
In accordance with Listing Rule 5.6 of the Australian Stock Exchange Limited, the geological information in this report that relates to Exploration Results, Mineral Resources and Ore Reserves is based on data compiled by Dr John Chisholm, a Fellow of The Australasian Institute of Mining and Metallurgy. Dr Chisholm has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Dr Chisholm consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.
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