PERTH (miningweekly.com) – Junior gold developer Pacific Niugini has struck a deal with its joint venture (JV) partner Bulletin Resources, to assist in the hunt for financing for the Nicholsons gold project, in Western Australia.

Under a heads of agreement, announced on Monday, Pacific Niugini would assist Bulletin in securing the financing requirements for the Nicholsons project, and to extend the same financing terms to Bulletin.

Bulletin would undertake to contribute its equity share of the project by meeting equivalent financing repayments, hedging requirements and its share of any equity required, prior to drawing loan funds.

Bulletin said the agreement allowed the company the best opportunity to finance its JV requirements and to benefit from superior loan terms, compared with those it was likely to secure on its own as a minority party in the project.

In exchange for Pacific Niugini’s assistance in the financing arrangement, Bulletin would transfer a further 15% interest in the Nicholsons project to its JV partner, taking Pacific Niugini’s share from 65% to 80%. The transfer would take place immediately upon the execution of a binding agreement.

Meanwhile, Pacific Niugini would continue to sole fund the project until January 1, after which Bulletin would contribute pro-rata to project costs in accordance with its 20% interest. As a result, Pacific Niugini would no longer be required to sole fund the first A$4-million of expenditure on the Nicholsons project to earn an 80% interest, and Bulletin’s cost contribution date would be brought forward.

At the end of last week, Pacific Niugini agreed to a financing proposal from the Commonwealth Bank of Australia, under which the financial services provider would complete a secured gold prepay and mandatory hedge facility to enable the refurbishment and development of the Nicholsons project.

Under the mandate and current agreed terms, the Commonwealth Bank would provide a gold prepay facility of up to A$11.5-million, subject to Pacific Niugini’s ultimate ownership share in the Nicholsons project.

Existing infrastructure at the Nicholsons mine would allow Pacific Niugini to restart operations for a minimal capital injection of A$10.7-million, with the project targeting production of about 130 000 t/y from a small-scale underground mine at the base of the existing openpit operation.

Pacific previously told shareholders that the company would directly employ the process plant and mine operators, while it would dry hire underground mining equipment for the initial operations, minimising the preproduction capital as far as possible.

The project was expected to have an initial mine life of four-and-a-half years, and would deliver a net profit after tax of A$50-million, a net present value of A$42-million and an internal rate of return of 162%.