Gippsland lines up tantalum deals
Article Date: Jan 19 2007Tantalum play Gippsland has said it should soon clinch financing and offtake deals for its large Abu Dabbab project in Egypt.
Jack Telford, boss of Western Australia-based Gippsland, suggested the AIM-quoted company, which has been talking to banks and industrial companies in Germany and elsewhere, will shortly be able to unveil long-term financing and crucial product offtake agreements with credible commercial buyers for Abu Dabbab. He aims to upgrade the project’s international-standard reserves by a third to 20 million tonnes of ore, proven and probable, with a decidedly commercial grade of 0.026 per cent tantalum oxide.
Telford said production is scheduled to start in the first quarter of 2009 and reach a sustainable 650,000 pounds a year with a possible further hike to an annual one million pounds.
He added that Gippsland is likely to seek equity funding of between $23 million (£11.5 million) and $30 million (£15 million) a well as bank finance for the project, whose capital expenditure is now expected to exceed $90 million (£45 million).
With an overall potential tantalum resource at 50 per cent-owned Abu Dabbab currently estimated at 40 million tonnes with 252 grams of tantalum oxide per tonne, and a second Egyptian project, Nuweibi, estimated to hold a potential resource of 98 million tonnes at 143 grams a tonne, Telford argues the two projects together could have a 40-year productive mine life. Tantalum, which does not melt below 3,000 degrees Centigrade, serves as a component in mobile phone capacitors and jet turbine engines, but its spot price is volatile and misleading since most is sold on long-term contracts, which are thus the key to obtaining finance for and extracting profits from projects such as Abu Dabbab.
Gippsland also has a half share in the Wadi Allaqi gold project south of Aswan. So far, the company has established only one inferred resource of 93,000 ounces at a low gold grade of 0.5 gram a tonne at Seiga, one of the three prospects there, but the hope is to increase that substantially.
Telford says he is lining up offtake and financing agreements, ‘which will make the market sit up’, although he admits it has taken longer than originally envisaged to reach this point. At 4p – between last year’s 6.75p high and 2.5p low – today’s share price reflects this delay and could perk up if the deals live up to expectations.
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