Ironbark Zinc Limited (ASX:IBG) has executed a Letter of Interest (LOI) with the Export-Import Bank of the United States (EXIM), the official export credit agency of the United States' Federal Government.
While the LOI is non-binding and does not represent an official commitment, the company views it as an important step in advancing a project financing plan for the development of its Citrönen zinc/lead deposit in Greenland.
Investors have similar optimism with shares surging 150% this morning to 3.2 cents, a new 2-year high.
Ironbark managing director Michael Jardine said: “The execution of this LOI is another significant, and potentially transformational, milestone in the Ironbark journey towards Citronen’s development and the long-promised move from developer to producer.
“Over the past six months, Ironbark has engaged with EXIM representatives to better understand each other’s business and to promote the alignment of our respective strategic goals, steadily building the foundations for a long-term relationship.
“The company could not ask for a better potential counterparty than EXIM, being the official export credit agency of the US government.”
Opportunity for US exporters
Jardine said that EXIM’s mission was to support American jobs by facilitating the export of US goods and services and that the company believed the Citrönen was an opportunity for US exporters to participate in a major mining development in Greenland.
He said: “EXIM has extensive experience in backing responsible mining developments and Ironbark looks forward to conforming with the bank’s high standards for environmentally and socially responsible mining.
"Ironbark intends to maintain this initial momentum by pursuing similar arrangements with other relevant ECA and commercial lenders.
“When the feasibility study is completed in early 2021 to a bankable standard, Ironbark will then seek to convert these preliminary arrangements into binding financing agreements for the development of Citronen.”
“Attracting foreign investment”
Greenland’s Ministry of Mineral Resources Permanent Secretary Jørgen Hammeken-Holm said: “The Government of Greenland is of course delighted to see EXIM’s expression of interest in supporting Ironbark, which reinforces the company’s longstanding commitment to the Citronen Project, and Greenland more broadly.
“As one of the country’s flagship resource projects, Citronen represents a unique near-term opportunity to diversify Greenland’s economic base and attract significant inbound foreign investment.
“We are fully supportive of the Ironbark Board and look forward to continuing our good relationship with the company as activity progresses further in 2021.”
Location of the Citronen Project in Greeland
Key commercial terms
Under the LOI, EXIM will consider financing up to US$216.125 million of the US content for the project and that a maximum loan term of 8.5 years will be made available to Ironbark.
Ironbark can select either a Guaranteed or Direct Loan, with the interest rate for the Direct Loan option is set at the Commercial Interest Reference Rate (CIRR) which is the official lending rates of export credit agencies (ECAs) and is calculated monthly based on the US Treasury Rate.
The current CIRR for transactions with a repayment period of 8.5 years is 1.46%.
An initial expiry date of six months from signing of the LOI has been agreed which can be renewed at Ironbark’s request at six-month intervals, for a maximum of two years.
Final investment decision
The EXIM LOI builds momentum towards achieving the company’s goal of a Final Investment Decision (FID) by FY2021 by:
- Creating a pathway to the establishment of EXIM as a finance provider for the Citronen Project;
- Crystalising the opportunity for further ECA and private sector participation from countries contributing substantial goods and services content to the project;
- Using its EXIM exposure to leverage access to US capital markets, given the leading role EXIM plays in US commerce and banking; and
- Significantly raising the profile of the Citronen Project’s ability to potentially underpin other strategic commercial and research opportunities in the high Arctic of Greenland.