# Pensana updates on financing for Longonjo and Saltend

- Link: https://www.directorstalkinterviews.com/pensana-updates-on-financing-for-longonjo-and-saltend/4121113164
- Published: 2023-04-03T08:32:04+01:00
- Author: Amilia Stone

Further to the release of the Interim Results on 31 March 2023, **Pensana plc **(
[LON:PRE](https://www.directorstalkinterviews.com/company/pensana-rare-earths-plc/pre.l))
has provided the following update on Financing and Project Development.

As reported the Company is at an advanced stage in its financing of both the Saltend
rare earth separation facility in the UK and the Longonjo mine in Angola. The total
capital requirement is US$550 million. 
Both projects are fully permitted, with 
FEED studies complete and early works programmes well underway on each site led 
by highly experienced project delivery teams.

The Company has been engaged with three parties to provide the required funding;
namely the previously announced US$175 million bond issue being arranged by ABG 
Sundal Collier, for which the Company has received green bond accreditation from
CICERO rating agency, a $220 million strategic equity investor which is before its
investment committee and a $150 million debt package being arranged by a South African
bank.

**Project Development Timeline**

The funds are required to be put in place between now and the end of the calendar
year in order to meet the proposed construction and commissioning schedule with 
first production targeted in 2025.

**Offtake Arrangements**

The Company has established a direct relationship with the key Japanese magnet manufacturers
and has entered into an MOU for 25% of Saltend’s annual production. It has ongoing
discussions with Japanese trading houses with direct access to the Japanese automotive
sector.

Terms have been agreed terms with a major European wind turbine OEM and the Company
has been shortlisted to supply major US and European automotive OEMs. Offtake discussions
with several automotive component manufacturers in the US and Europe are underway.

The Company is working closely with its customers to establish an independent and
sustainable supply chain providing them with a cost effective, fully transparent
and an ultra-low embedded carbon range of rare earth products.

At a time when there is growing public concern about the provenance of rare earth
extraction and the resilience of supply chains in general, the Company’s ability
to demonstrate, in particular to consumer facing automotive OEMs, that it can provide
an independently validated sustainable product from the UK is an increasingly attractive
point of differentiation.
**Technical Due Diligence – Longonjo and Saltend**

The technical due diligence undertaken by independent third parties on behalf of
the financing parties has highlighted that the state-of-the-art Longonjo mine is
one of the largest and highest grade undeveloped rare earth mines in the world. 

The near surface, deeply weathered orebody, has an average depth of 35 metres, with
a mine grade of 3.72% TREO and NdPr 0.78% and over the first five years is anticipated
to produce around 46,000 tonnes per annum of mixed rare earth sulphate for export
to Saltend.

The Longonjo mine is linked to the Atlantic Port of Lobito via the Benguela rail
line which in a recent joint announcement by the Governments of Angola, Zambia and
DRC has been designated as the Lobito Trade Corridor and concessioned to Portuguese
infrastructure group Mota-Engil for a $450 million upgrade.

Exploration results from the Sulima West target on the Coola exploration licence
located 40 kilometres north of Longonjo reported rare earth grades of up to 9.7%
TREO averaging 3.4% TREO over 68 metres in surface trenches highlighting the potential
to extend the 20-year mine life at Longonjo.

Saltend will initially produce around 12,500 tonnes of TREO including 4,500 tonnes
of NdPr oxide per year making it one of the top three producers in the world outside
China and has capacity for expansion to meet the growing demand for magnet metal
rare earths from electric vehicles and offshore wind.

**Independent Rare Earth Processing Hub**

Located in the Saltend Chemical Park in the Humber Freeport, Saltend will be the
world’s  first rare earth processing hub, capable of processing third party feedstock
imported from around the world. A number of discussions are underway with potential
third-party feedstock suppliers for access to uncommitted processing capacity at
Saltend.

The Company has partnered with the adjacent Yorkshire Energy Park for a private 
wire connection to offshore wind battery storage under which it will have access
to 4 MW rising to 10 MW of low carbon electricity for ten years and together with
Longonjo’s ten-year low-cost supply of hydro-electric power the Company is able 
to demonstrate that it can supply ultra-low embedded carbon products from mine to
customer.

A direct example of this is Pensana’s partnership with Polestar to create the first
truly climate-neutral car by 2030. The scope of the Polestar 0 project is to identify
and eliminate all greenhouse gas emissions from the extraction of raw materials 
to when the car is delivered to the customer and onwards to the end of vehicle life.

**Hydro-electric Power at Longonjo and Low-cost Electricity in the UK**

The company has entered into a ten-year contract for electricity at prices around
US$ 2 cents per kwh to power the Longonjo mine supplied from the hydroelectrical
power grid.

For Saltend the UK Government’s Business Industry supercharger program will exempt
firms from certain costs arising from renewable energy obligations such as the Feed
in Tariff, Contracts for Difference and the Renewables Obligation, as well as GB
Capacity Market costs in addition to lower network charges providing power at a 
competitive rate to other major economies around the world.

This future low-cost supply of low-carbon electricity may power the Saltend separation
facility expansion plans including the conversion of NdPr Oxide into magnet metal,
this use of offshore wind to produce ultra-low carbon magnet metal will be a significant
step to further decarbonize the rare earth supply chain.

The Company and Equinor are studying the use of low carbon hydrogen produced from
Equinor’s flagship 600MW low-carbon hydrogen production plant with carbon capture,
Hydrogen to Humber (H2H) at Saltend, to recycle the seven tonnes of rare earth permanent
magnets in the nacelles of wind turbines currently being installed in the 3.6GW 
Dogger Bank windfarm.

The Company is committed to responsible and sustainable production and has implemented
a range of environmental and social initiatives to support the communities in which
it operates.

**Financial and Production Summary**

The key material assumptions and outcomes of the results of the study are set out
below:

|  |  | **UNIT** | 
| **PRODUCTION ASSUMPTIONS** |  |  | 
| Life of Mine (based on Proven and Probable Reserves) | 20 | years | 
| Average grade, TREO (Year 1-5) | 3.73 | % | 
| Average grade, TREO (Year 6-20) | 2.10 | % | 
| Average grade, NdPr (Year 1-5) | 0.79 | % | 
| Average grade, NdPr (Year 6-20) | 0.46 | % | 
| Average strip ratio (LOM) | 0.21 | waste:feed | 
| Design ROM throughput | 1.5 | mtpa_(dry) | 
| Design concentrator production | 110,000 | tpa_(dry) | 
| Design MRES Refinery production | 41,100 |  tpa_(dry) | 
| Design Saltend Refinery capacity | 46,600 | tpa_(dry) | 
| **Annual Production of Rare Earth Oxides (TREO)** | 12,500 | tpa | 
| **Annual Production NdPr Oxides^(1)** (included in TREO) | 4,500 | tpa | 
| Average concentrator recovery (NdPr) | 41 | % | 
| Average MRES recovery (NdPr) | 72 | % | 
| Average SX recovery (NdPr) | 93 | % | 
| **OPERATING COSTS^(2)** |  |  | 
| Average annual operating cost  | 198  | US$ million | 
| Average operating (total rare earth oxide) | 20  | US$/kg | 
| **CAPITAL COSTS ** |  |  | 
| Saltend Refinery | 197 | US$ million | 
| Longonjo Mine Infrastructure | 49 | US$ million | 
| Longonjo Concentrator Plant | 123 | US$ million | 
| Longonjo MRES Refinery | 133 | US$ million | 
| **Total Capital Pre-production** | 502 | US$ million | 
| Average annual sustaining capital (year 1 – 5) | 7 | US$ million  | 
| Average annual sustaining capital (from year 6) | 19 | US$ million  | 
| **FINANCIAL METRICS^(3)** |  |  | 
| **Revenue** (average p.a. based on first five years steady state production) | 989 | US$ million | 
| **EBITDA** (average p.a. based on first five years steady state production) | 631 | US$ million | 
| **NPV_(8 )** (un-leveraged, post-tax)^(4) | 3.5 | US$ billion | 
| **IRR** | 60 | %  | 
| **Payback from first production** | 1.5 | years |

Source: Company information. Management estimates, inclusive of Pensana’s Longonjo
and Saltend operations, are based on underlying independent studies undertaken by
independent consultants.

Notes:

 1. _Targeted annual production assumes sourcing third party MREDS / MREC feed to be
    processed at Saltend as an alternative to ramping Longonjo up_
 2. _Based on cost and production excluding 3rd party feedstock. Total cost of US$198
    million per annum is split US$127 million for Longonjo and $71 million for Saltend._
 3. _Assumes third party feed to be purchased at same cost per tonnes of MRES when 
    compared to Longonjo._
 4. _NPV is calculated at an operational level pre-financing which is anticipated to
    be a blend of equity and long-term debt financing. Revenue is based on NdPr oxide
    prices according to Adamas Intelligence base forecast (Q2 2022). NdPr oxide prices
    starting at $172/kg in 2023, escalating at CAGR of 3.1% p.a. to 2035, flat real
    thereafter._

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