PERTH (miningweekly.com) – Resource investment company Cape Lambert on Wednesday announced that it had entered into a term sheet with Timis Mining to provide that company with about $20-million for its planned acquisition of the Marampa iron-ore project, in Sierra Leone, from the administrators of London Mining.

Under the terms of the agreement, Cape Lambert would provide an $8-million bridging finance facility, and some $12-million to purchase a royalty.

The bridging facility would be repayable in 12 months and would incur an interest of three months London interbank offered rate plus 6%. The principal and interest would be repaid to Cape Lambert in one payment at the end of the 12-month loan period.

Meanwhile, Cape Lambert had also negotiated the purchase of a royalty for $12-million with Timis Mining, in exchange for $2/t of iron concentrate exported from the Marampa mine.

The royalty would be payable on a quarterly basis and would start from the first shipment of concentrate from Marampa, following the completion of the acquisition.

The royalty would be payable over a four-year period and in the event that operations at the mine are temporarily suspended for a force majeure event, the royalty period would be extended by the same period.

“This funding agreement represents a very good deal for the company and for its shareholders. The Timis Mining-owned Marampa mine is expected to produce between five-million and seven-million tonnes of iron concentrate a year, which means a potential income stream to Cape Lambert of between $10-million and $14-million a year, or up to $56-million in total over the term of the royalty,” said Cape Lambert executive chairperson Tony Sage.

He noted that Cape Lambert had further negotiated the sale of oxide material from its own Sierra Leone projects to Timis Mining, which is located adjacent to the Marampa mine.

Under the terms of this agreement, Timis would have exclusive rights to purchase 100-million tonnes of oxide material, or a greater amount as defined by further drilling from Cape Lambert’s Sierra Leone projects.

The sales price for the oxide would range between $3/t and $5/t, potentially earning the ASX-listed company between $300-million and $500-million over the life of the mine.

Sage said that a drilling campaign to increase the upside of the company’s oxide resource was planned to begin 12 months after Timis started mining at Cape Lambert’s Sierra Leone projects.

The drilling campaign, and any costs associated with mining operations, would be borne by Timis.

The funding agreement announced on Wednesday was conditional upon Timis securing the London Mining assets from the company’s administrators.

The West Africa-focused miner went into administration in October this year, after battling high costs, a sharp drop in the iron-ore price and the impact of the Ebola virus on its operations.