The JV partners are Sumitomo Corporation and Korea Resources Corporation.
The revisions as stated by Sherritt include the elimination of Ambatovy Joint Venture additional partner loans (US$1.4 billion at 31 March 2017) from Sherritt’s balance sheet with transfer of 28% interest in Ambatovy.
Sherritt will also reduce its interest to 12% from the current 40% and resume funding for a 12% interest retroactively to the end of 2015 (Sherritt cash payment upon closing of approximately $24 million, including accrued interest).
In addition Sherritt will escrow approximately $23 million to satisfy 12% of potential future funding requirements. Amounts in escrow not used for project funding will be used to repay the Ambatovy Joint Venture partner loans at maturity ($132.3 million at March 31, 2017).
Lastly, Sherritt will remain as operator until at least 2024.
“After months of negotiation, I am pleased to be able to announce a resolution which removes the largest area of uncertainty for both Ambatovy and ourselves. With this transaction, we eliminate $1.4 billion in debt from our balance sheet, and maintain our exposure to Ambatovy with a clean 12% interest and continuity as the operator,” comments President and CEO of Sherritt International, David Pathe.
Discussions continue to advance positively among the partners with substantial progress being made to resolve tax, accounting and ancillary business issues associated with the revised structure, in order to complete binding and definitive documentation as soon as possible.
Implementation of the revised structure would be subject to certain internal and third party approvals, including senior project lender approvals. Additional details regarding the transaction are expected to be disclosed once partner approvals are obtained.
In light of this development, Sumitomo Corporation and Korea Resources Corporation have agreed to a waiver extension to 30 June 2017 which will automatically be renewed for additional one-month terms until 30 October 2017 unless Sumitomo Corporation or Korea Resources Corporation provide notice of termination not less than seven business days prior to the end of the prevailing term.
This longer extension and automatic renewal is meant to provide sufficient time for binding and definitive documentation to be completed and for execution and closing of the transaction.
Feature image credit: Sherritt International
(The Ambatovy nickel and cobalt mine in Madagascar)