April 17, 2008 TSX:BAJ
PRESS
RELEASE
BAJA
MINING WELCOMES KORES AS DEVELOPMENT PARTNER AT EL BOLEO PROJECT
Baja Mining Corp.
(the “Company” or “Baja”) is pleased to announce a new development
partner and financing arrangements for the construction of its El Boleo Project
(the “Project”).
Development Partner and Construction
Financing
It is with great
pleasure that Baja announces it has entered into an agreement with a Korean consortium
(the “Consortium”) led by Korea Resources Corporation (“Kores”)
pursuant to which the Consortium will acquire a 30% interest in the Project through
the acquisition of a 30% interest in the Company’s Mexican subsidiary,
Minera y Metalurgica del Boleo S.A. de C.V. (“MMB”).
As consideration for
the acquisition of a 30% interest in the Project, the Consortium will provide a
financing package of up to US$435 million. This will consist of an up-front cash
payment to Baja, reimbursement of agreed project expenditures since completion
of the DFS, payment of the Consortium’s proportionate share of project
capital costs and, in conjunction with a Korean lending agency, a package of
senior and subordinated debt financing. In addition, the Consortium will
provide a completion guarantee in respect of its share of project financing. Through
the transaction, the Consortium will also acquire a right to offtake 30% of the
El Boleo mine’s production on commercial terms.
The signing
of the Sale and Purchase Agreement took place at
a ceremony in Washington
today attended by a delegation from the Government of Korea led by Mr Youn Ho
Lee, the Minister of
Knowledge
Economy. The delegation included Mr Han-Ho Lee, President and CEO of
Kores and a number of other senior Korean Government officials, demonstrating
the importance of this transaction.
As previously
reported, Baja appointed Bayerische Hypo-und Vereinsbank AG, a member of
Unicredit Group (“HVB”), as the mandated lead arranger to arrange
and underwrite a project debt financing comprising a project debt facility of
US$475 million and an additional US$40 million cost over-run facility. Baja is
in discussions with HVB about increasing the size of the debt financing through
the involvement of the Korean lending agency.
Kores is a
state-owned corporation of the Government of the Republic
of Korea with a mandate to pursue
resource development opportunities to supply Korea’s expanding industrial
economy. Baja is very pleased to be working with a strong partner that brings
natural resources experience and financial capability to the Project.
In
addition to normal conditions precedent for transactions of this nature,
the transactions are subject to the approval
of the Boards of the Korean Consortium and Baja, the government of Korea, the
Mexican Federal Commission of Competition and the Toronto Stock Exchange, and
are also subject to the negotiation and bank approval of the final debt terms
and credit structure. Baja and its Financial Advisor, Endeavour Financial
International Corporation (“Endeavour”), continue to progress these
final negotiations with a view to closing each transaction as expeditiously as
possible.
Capital
Cost Update
The Company completed
a Definitive Feasibility Study (“DFS”) on the Project in May 2007
(see press release dated May 29, 2007). The DFS noted that the capital cost
estimate was current to early 2007 with respect to mine capital, but that most
of the process plant capital estimate was from June 2006. The DFS estimated the
capital cost to construct the mine and mill facility at US$568 million
(approximately US$680 million with finance costs, contractor fees, working
capital and spares).
Recognizing that
there has been severe cost escalation in other recently announced projects, Baja
elected to update the DFS capital cost estimate, with the assistance of the
construction contractor, The Industrial Company (“TIC”), of Steamboat Springs, Colorado,
and TIC’s wholly owned Mexican subsidiary, MexTICa. Orders for approximately
60% of the process equipment have been placed (representing approximately 23%
of the construction cost of the project), primarily via 3 major packages: (1) the
acid plant and cogeneration facility with SNC Lavalin-Fenco; (2) the front-end
ore and limestone preparation circuits (crushing, grinding, and screening, as
well as solid/liquid separation) with FL Smidth; and (3) the solvent extraction
and Electrowinning circuits with Bateman Litwin.
There is low risk
on price escalation of these packages going forward. While the capital cost review
is at a feasibility study level, it has the added advantage of the detailed
review by the construction contractor.
The cost review
has indicated that the capital cost of the project has increased to US$890 million
(including contractor’s profit, which was not included in the initial
estimate, as well as a 12% contingency). Working capital, financing costs and
pre-production interest during construction are expected to add approximately
US$101 million, for a total funding requirement of approximately US$991 million.
The difference between the total funding required and funding arranged to date
is anticipated to be provided in part from cash on hand, and the balance either
by a Baja equity contribution or a combination of equity and possible financing
related to metal off-take contracts. Baja and Endeavour continue to hold
discussions with various parties regarding the provision of this additional
potential funding.
The following
table sets forth the Net Present Values (at an 8% discount rate and in millions
of US Dollars) of the project (for a 100% interest, assuming all equity and on
an after tax basis). These figures are based on the revised capital costs and
utilizing: US$1200 per tonne for zinc sulphate; the forward curve until 2013 for
copper on the London Metal Exchange*; and thereafter dropping to the indicated
copper prices in the table. All other inputs and assumptions have been taken
from the DFS.
|
|
Cu Price ($/lb)
|
|
|
$ 1.50
|
$ 2.00
|
$ 2.50
|
$ 3.00
|
$ 3.50
|
$ 4.00
|
Co Price $/lb
|
$ 15.00
|
$ 637
|
$ 890
|
$ 1,142
|
$ 1,394
|
$ 1,646
|
$ 1,898
|
$ 25.00
|
$ 903
|
$ 1,155
|
$ 1,407
|
$ 1,659
|
$ 1,911
|
$ 2,163
|
$ 35.00
|
$ 1,167
|
$ 1,4190
|
$ 1,671
|
$ 1,923
|
$ 2,175
|
$ 2,437
|
$ 45.00
|
$ 1,432
|
$ 1,6840
|
$ 1,936
|
$ 2,198
|
$ 2,451
|
$ 2,704
|
$ 55.00
|
$ 1,706
|
$ 1,9590
|
$ 2,212
|
$ 2,465
|
$ 2,717
|
$ 2,970
|
* LME copper forward curve prices as of March 31 were:
2010-$3.44/lb; 2011-$3.27/lb; 2012-$3.13/lb
ON BEHALF OF THE BOARD OF
DIRECTORS OF
BAJA MINING CORP.
“John W. Greenslade”
JOHN W. GREENSLADE,
PRESIDENT
For
further information please contact John Greenslade,
President, at (604) 685-2323
Some of the statements contained in this release are
forward-looking statements, such as statements that describe the
Company’s expectation and timing of closing the Consortium’s
partnership deal, projected metal prices, the need for additional capital and
expected method of financing and other statements. Since forward-looking
statements are not statements of historical fact and address future events,
conditions and expectations, forward-looking statements by their nature
inherently involve unknown risks, uncertainties, assumptions and other factors
well beyond the Company’s ability to control or predict. Actual results
and developments may differ materially from those contemplated by such
forward-looking statements. Material factors that could cause actual revenues
to differ materially from those contained in such forwarding-looking statements
include (i) fluctuations on the prices of copper, cobalt, zinc and manganese,
(ii) interpretation of contract terms, (iii) accuracy of the Company’s and
consultants’ projections, (iv) the Company’s ability to finance,
receive permits for, obtain equipment, construct and develop the El Boleo
Project, (v) the effects of weather; operating hazards; adverse geological
conditions and global warming, (vi) impact of availability of labor, materials
and equipment; and (vii) changes in governmental laws, regulations, economic
conditions or shifts in political attitudes or stability.
These
forward-looking statements represent the Company’s views as of the date
of this release. There can be no assurance that forward-looking statements will
prove to be accurate, as actual results and future events could differ
materially from those anticipated in such statements. Readers should not place
undue reliance on any forward-looking statements.