Develop Global Secures Funding and Offtake Deal with Trafigura for Woodlawn Mine
DEVELOP GLOBAL LIMITED (DVP) Share Update August 2024 Thursday 1st
Develop Global Secures $100M Funding for Woodlawn Copper-Zinc Mine
Develop Global Limited (ASX: DVP) has announced a significant funding and offtake agreement with Trafigura, a leading global commodities trader, for its Woodlawn copper-zinc mine in New South Wales. This deal is set to fully fund the mine through to production, expected to commence in mid-2025.
Instant Summary:
- Trafigura to provide US$65 million (~A$100 million) in a prepayment/loan facility.
- Woodlawn mine now fully funded through to production with existing cash reserves and profitable mining services.
- Competitive interest rates: SOFR 3 month + 2.0% (US$) or BBSY 3 month + 2.0% (A$).
- No hedging requirement, allowing exposure to commodity price rises.
- Five-year offtake arrangement with Trafigura for all of Woodlawn's production.
- Pre-tax NPV of Woodlawn increases by 11% from A$658 million to A$728 million.
- Forecast pre-tax free cashflow grows to A$1.1 billion over a 10-year mine plan.
Funding and Offtake Agreement
Develop Global Limited has secured a prepayment/loan facility of US$65 million (approximately A$100 million) from Trafigura, a leading global commodities trader. This funding, combined with Develop's existing cash reserves of A$41 million as of June 30, 2024, and its profitable mining services division, ensures that the Woodlawn mine is fully funded through to production, expected in mid-2025.
The terms of the facility are highly competitive, with an interest rate of SOFR 3 month plus 2.0% if drawn in US dollars or BBSY 3 month plus 2.0% if drawn in Australian dollars. This reflects the substantial A$400 million equity capital already invested in the mine by Develop and the previous owner.
Offtake Arrangement
In addition to the funding, Trafigura will purchase all of Woodlawn's production under a five-year offtake arrangement. This deal provides significant flexibility, allowing Develop to pursue other growth opportunities within its portfolio, such as Sulphur Springs and Pioneer Dome, or any new opportunities that may arise.
Financial Impact
The prepayment/loan facility and offtake arrangement have positively impacted Woodlawn's financial metrics. The pre-tax Net Present Value (NPV) has increased by 11% from A$658 million to A$728 million, based on the same commodity price assumptions used in April. Additionally, the forecast pre-tax free cashflow has grown to A$1.1 billion over a 10-year mine plan.
At recent spot prices for copper and zinc, the first three years of post-ramp-up production are expected to yield approximately A$375 million in free cashflow, providing substantial cash generation while repaying the debt.
This funding and offtake agreement is a significant milestone for Develop Global. The competitive terms and flexibility of the facility indicate strong confidence in the Woodlawn mine's potential. The increase in NPV and forecasted cashflows will likely boost investor confidence and positively impact the company's stock price.
Investor Reaction:
Analysts are expected to react positively to this announcement, given the favorable terms of the funding and the substantial increase in projected financial returns. The lack of a hedging requirement and the flexibility to pursue other growth opportunities are additional positives that investors will likely appreciate.
Conclusion:
Investors should consider the long-term potential of Develop Global's Woodlawn mine, now fully funded and on track for production in mid-2025. The strategic partnership with Trafigura and the improved financial metrics make this a compelling opportunity. Stay tuned for further updates as the project progresses.