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International law firm Fieldfisher has advised TSX-V-listed Canadian company, Strongbow Exploration Inc., on successfully closing a conditional "synthetic" offtake agreement with specialist mining private equity fund, Orion Mine Finance.
Strongbow is the owner of South Crofty, the iconic former-producing copper and tin mine near Camborne and Pool in Cornwall. The company plans to bring the mine back into production following a proposed dual listing on London's AIM market.
Strongbow announced its offtake deal with US-headquartered Orion on 17 October, marking yet another example of the use of non-traditional forms of financing in the mining sector.
The offtake provides for the sale to Orion of 5% of the next 10 years of tin production from South Crofty, through the delivery of London Metal Exchange (“LME”) tin warrants representing tin refined to LME-Approved Brands, rather than the physical tin itself.
The agreement is conditional on Orion making an equity investment of at least US$3 million in Strongbow, as part of the company's planned AIM fundraising.
This type of production-based financing, whereby companies sell rights to receive future output from their mines, has grown rapidly in popularity since the commodities market downturn in 2011/2012.
Now, with commodity prices back in firmer territory and investors beginning to return to the mining industry, mining companies have a wider choice of funding options to choose from to get their projects off the ground.
They also have the flexibility to tailor deals to their specific project needs and to receive funding at an earlier stage of the project's development – a luxury that is not always available to them with traditional project finance investment.
Such arrangements are typically only possible once a mine is at the development stage. Production-based financing has the added advantage of de-risking projects in the eyes of banks.
For offtakers and traders, there are numerous benefits to securing advance access to commodity supply, which they have the freedom to dispose of in the most commercially advantageous manner.
Such deals typically involve expert legal and other advisers with extensive mining sector experience, who can provide guidance on considerations such as the scope of the offtake, the length of the offtake term, delivery and purchasing obligations, pricing and the termination of contracts.
For Strongbow, the offtake agreement with Orion represents a further endorsement of the South Crofty project, allowing the company to work towards its AIM admission before the end of this year.
The company is preparing for the dewatering of the now flooded mine workings with a view to re-commencing tin production at South Crofty.
Fieldfisher corporate partner Jonathan Brooks advised Strongbow on the Orion offtake agreement and is leading a team comprising directors Ed Westhead and Gary Pickard, senior associate Owain Davies and paralegal Jamal Moursy working on the company's AIM admission and a placing to raise funding to re-start production at South Crofty.
About Fieldfisher
Fieldfisher is a European law firm with market leading practices in many of the world's most dynamic sectors. We are an exciting, forward-thinking organisation with a particular focus on energy & natural resources, technology, finance & financial services, life sciences and media.
Fieldfisher's dedicated mining team advises companies, metals traders, banks and investment funds on alternative financing arrangements in the mining sector, including prepay and offtake funding agreements and is one of the leading firms in this niche area of the market.
The firm is also the sixth largest adviser to companies listed on London's AIM market, many of which are in the mining and energy sectors.
Our network has more than 1,450 people working across 24 offices providing highly commercial advice based on an in-depth understanding of our clients' needs.
We operate across our offices in Amsterdam, Barcelona, Beijing, Belfast, Birmingham, Bologna, Brussels, Düsseldorf, Frankfurt, Guangzhou, Hamburg, London, Luxembourg, Madrid, Manchester, Milan, Munich, Paris, Rome, Shanghai, Turin, Venice and Silicon Valley.
Fieldfisher is currently Law Firm of the Year - Legal Business Awards 2018 and British Legal Awards 2017.
About South Crofty
South Crofty is an iconic former producing copper and tin mine located in the towns of Camborne and Pool, Cornwall, UK. The first documented production history from South Crofty dates back to 1592, and it was the last tin mine to close in Cornwall in 1998.
South Crofty, one of the highest grade tin resources globally, is well placed to deliver “clean tin” to end users seeking to secure supply that is conflict-free, does not exploit child labour, and does not have a negative environmental impact.
The project received an Underground Permission (mining licence) in 2013, which is valid until 2071, and Planning Permission to construct a new process plant in 2011.
For more information on Strongbow Exploration and South Crofty, please visit the company's website.