Baja Mining signs US$858 million financing for Boleo project

Construction and development can start “imminently” at Baja Mining‘s(BAJ-T, BAJFF-O) Boleo project in Mexico’s state of Baja California Sur following a US$858 million financing, the company reports. The copper-cobalt-zinc-manganese project is targeted for copper commissioning in 2012.

Baja Mining’s 70%-owned company Minera y Metalurgica del Boleo (MMB) has completed a financing deal worth US$858 million consisting of US$823 million in project financing debt facilities and a US$35 million equity cost overrun support facility.

The US$823 million, which makes up the total amount of debt financing needed to develop the project, is being provided by the Export-Import Bank of the United States (EXIM); Export Development Canada (EDC); the Korea Development Bank (KDB); and by a group of commercial banks made up of Barclays Capital (Barclays Bank’s investment banking division); Standard Bank; Standard Chartered Bank, UniCredit Bank; and WestLB.

Louis Dreyfus Commodities is providing the US$35 million equity cost overrun agreement in the form of a letter of credit. (The Louis Dreyfus Commodities Group is one of the world’s leading commodity merchants and processors of agricultural, energy and metal products.)

Vancouver-based Baja Mining holds a 70% interest in the project and is the operator, with a syndicate of Korean industrial companies holding the remaining 30%.

The project is located near tidewater on the east cost of Baja California Sur, adjacent to the town of Santa Rosalia, about 850 km south of San Diego, California.

The deposit was mined continuously by underground methods from 1886 until 1972, during which time about 18 million tonnes of ore were treated. Since then, both underground and open-pit mining were carried out sporadically until the copper smelter at Santa Rosalia closed in 1985.

MMB acquired the property in 2001 and has undertaken exploration and project development activities ever since.

The Boleo project has a copper-cobalt-zinc-manganese resource consisting of 265 million tonnes of measured and indicated resources grading 1.50% copper equivalent (including roughly 85 million tonnes of proven and probable reserves)and inferred resources of 159 million tonnes grading 1.15% copper equivalent.

A National Instrument 43-101 compliant updated technical report in January 2010 confirmed that the Boleo project can be developed economically at an after-tax internal rate of return (based on the three-year trailing average for metal prices at such time) of 25.6%, based on 100% equity.

The project has a minimum scheduled mine life of 25 years (during which 71 million tonnes of the proven and probable reserves will be exploited). The net present value has been estimated at US$1.31 billion, using an 8% discount rate, and an average life-of-mine cash cost of negative $0.29 per lb. copper, net of byproduct credits.

At presstime Baja Mining was trading at 99¢ per share and has a 52-week trading range of 54¢-$1.06 per share. The junior has 165.9 million shares outstanding.