Monday April 28, 2014, 4:45pm PDT
By Charlotte McLeod+ - Exclusive to Moly Investing News
2013 wasn’t the best year for molybdenum. Prices for the metal were fairly lackluster, and analysts repeatedly cautioned that a recovery likely would not happen until at least 2014.
While that atmosphere prompted some market watchers and participants to take to the sidelines, it hasn’t stopped exploration and development company Avanti Mining (TSXV:AVT) from making substantial progress at its Kitsault molybdenum project, located in Northern British Columbia. In fact, in just the last six months or so the company has, among other things, further optimized the feasibility study for the project and signed a memorandum of understanding with the Wilp Luuxhon.
Most recently, however, Avanti revealed that it has entered into an offtake agreement with SeAH M&S, one of the largest steel manufacturers in South Korea. Under the agreement, SeAH will buy, “at prices based on the market price,” as much as 20 percent of Kitsault’s molybdenum concentrate production over a period of 13 years.
Specifically, the agreement “provides for the annual delivery” of 4,200 metric tons (MT) of molybdenum concentrate to SeAh for 12 years, though upon mutual agreement between the two companies, that amount “can be adjusted upwards or downwards by 10%.” Further, in the year prior to the start of that 12-year period, an additional 4,200 MT of molybdenum concentrate will be delivered SeAH. That, according to Avanti, represents about US$800 million of potential molybdenum revenue based on price assumptions reported in its updated feasibility study.
Avanti is understandably pleased with the agreement, which is contingent upon a Korean bank or other Korean lender participating in the second tranche of a project debt facility currently being arranged by Avanti. Indeed, Gordon Bogden, the company’s president and CEO said “is an important step in finalizing a project debt finance facility for Kitsault.”
However, what makes the deal even more noteworthy is the fact that it’s the second offtake agreement Avanti has arranged for Kitsault. The first, which the company entered into back in June 2013, is with Germany’s ThyssenKrupp Metallurgical Products (TKMetPro) and is for 50 percent of Kitsault’s molybdenum production over the course of the mine’s life. It also gives TKMetPro, which operates in 80 countries and recorded sales of 40 billion euros last year, the right of first refusal for further molybdenum produced by Avanti at other projects when the agreement is in effect.
Moving forward, investors should look for Kitsault to receive a federal environmental assessment decision “in the near future.” Shares of Avanti are currently selling for $0.07 each, 16.67 percent higher than at close on Friday.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.