Walkabout Resources Ltd (ASX:WKT) has given its high-grade Lindi Jumbo Graphite Project in Tanzania another shot in the arm with the execution of a final loan agreement for an amount of US$25 million with Gemcorp Investment Committee.
The senior debt facility has an interest rate margin fixed at 14% for the first US$20 million tranche and 16% above the benchmark Secured Overnight Financing Rate (SOFR) for the final tranche of US$5 million.
This facility will be available for drawdown until March next year, with the first drawdown, primarily to pay off initial funding for the construction of Lindi Jumbo, expected to be available shortly.
Protecting equity value
“We are very pleased with the final execution of the debt facility and to have the support of Gemcorp as we move into the final stages of the construction of the Lindi Jumbo Graphite Mine,” Walkabout Resources chief executive officer Andrew Cunningham said.
“The structure of the financing allows us to avoid equity dilution on the transaction and will allow shareholders to benefit in the medium to long term.”
No cashflow in the first year
The senior debt facility covers a three-year period, with Gemcorp being entitled to a percentage of free cashflow after debt servicing for the period.
Walkabout is not expecting any free cashflow for the better part of Lindi Jumbo’s first year though as the project will be in the construction, commissioning and start-up phase.
Apart from the construction cost, the remainder of the facility will be used to fund commissioning and provide working capital for the company and Lindi Jumbo.
About Lindi Jumbo
Walkabout is developing the Lindi Jumbo Project to take advantage of forecast market conditions for large and jumbo flake graphite products.
The company holds 100% of a mining licence and between 70% and 100% of adjacent graphite prospecting licences at Lindi Jumbo, with an enduring option to acquire the remaining 30% share.
A high-grade graphite mineral reserve has been delineated within the mining licence area.