Minerals 260 lines up A$410M for gold project

Minerals 260 (ASX: MI6) has secured A$410 million (C$399 million) in bank debt for its Bullabulling gold project in Western Australia, with no requirement to lock in future gold prices.

ANZ, National Australia Bank and Société Générale have committed A$335 million for project financing and A$75 million for working capital. Together with equity and Franco-Nevada (TSX: FNV; NYSE: FNV) royalty funding, the package would cover development through first production, Minerals 260 said Wednesday.

Securing credit approval before completing the feasibility study reflects “the high quality, high margin and long-life aspects of Bullabulling,” Managing Director Luke McFadyen said in the release.

The backing advances a potential 150,000-oz.-a-year producer near Kalgoorlie, while leaving the construction decision and final loan conditions due early next year. Bullabulling could begin producing in the second half of 2028, Franco-Nevada said in September.

Early 2027 decision

Financing conditions include completing the definitive feasibility study, final due diligence, loan documents and an agreement with Franco-Nevada governing creditors’ rights. The first debt drawdown is expected late next year.

The project loan runs for seven years and working capital financing for four. Interest is less than three percentage points above Australia’s bank bill swap bid rate — equivalent to below about 8% annually using the current three-month benchmark. The company hasn’t disclosed the exact margin or benchmark term. Interest accrued during construction will be added to the debt.

BMO Capital Markets initiated coverage on Nov. 10 with an outperform rating and a A$1.75 share-price target. That is nearly twice Wednesday’s closing price of A88¢, a 3.5% gain, valuing the company at about A$2.25 billion. The shares have traded between about A29¢ and A$1 over the past year.

Royalty funding

Franco-Nevada agreed in September to provide another $170 million in royalty funding and buy $30 million of Minerals 260 shares. That brought its aggregate backing to $420 million and increased its gross royalty on Bullabulling to 3.9% from 2.45%.

July’s prefeasibility study envisaged annual output averaging about 150,000 oz. over the first decade and a 19-year operating life. The initial processing plant would handle 5 million tonnes annually, with provision for expansion, Franco-Nevada said.

Bullabulling, 65 km from Kalgoorlie, has 140 million indicated tonnes at 0.98 gram per tonne gold for 4.4 million oz., plus 51 million inferred tonnes at 1 gram gold for 1.7 million oz., according to a resource issued in July.