Ann: Binding Offtake and Prepayment with Trafigura, page-7

US$30 Million Prepayment Term Sheet and Offtake Agreement
Executed with a Global Commodities Trader
Boab Metals Limited (ASX: BML) (“Boab” or “Company” is pleased to announce that its wholly
owned subsidiary, Sorby Hills Pty Ltd (“SHPL”, has executed a binding offtake agreement (the
“Offtake Agreement” with Trafigura Asia Trading Pte. Ltd. (“Trafigura” for lead-silver
concentrate produced from the Company’s flagship Sorby Hills Lead-Silver-Zinc Project,
located in the Kimberley Region of Western Australia (“Sorby Hills” or “the Project”.
In conjunction with the Offtake Agreement, the Company, SHPL and Trafigura have executed
a binding term sheet (the “Prepayment Term Sheet” for a US$30 million prepayment facility
(the “Prepayment Facility” which is subject to the satisfaction of certain conditions precedent.
HIGHLIGHTS OF THE PREPAYMENT AND OFFTAKE TRANSACTIONS
Prepayment Term Sheet
• US$30 million Prepayment Facility from Trafigura to be applied towards the
construction and development of the Project.
• Interest Rate of SOFR1 + 5% per annum.
• 5-year Term from first drawdown with an 18-month interest only period.
• To be repaid via equal monthly instalments over 42 months following the 18-month
interest only period.
• Financial Close and drawdown of the Prepayment Facility are subject to, amongst other
things, the execution of definitive agreements, the finalisation of due diligence to
Trafigura’s satisfaction and the Project being fully funded.
Offtake Agreement
• If Financial Close on the Prepayment Facility is achieved, the offtake will be for 75% of
lead-silver concentrate produced at Sorby Hills, (minimum 531,000 tonnes, ~7 years
based on the FEED Study production schedule).
• If Financial Close on the Prepayment Facility is not achieved, the offtake will be for 25%
(or greater, at SHPL’s discretion) of lead-silver concentrate produced at Sorby Hills
(minimum 177,000 tonnes) provided that if Boab exercises its option to terminate the
Prepayment Term Sheet or obtains alternative financing for development and
construction of the Project, the offtake will be for 50% (or greater, at SHPL’s discretion)
of lead-silver concentrate produced at Sorby Hills (minimum 354,000 tonnes).
Boab Managing Director and CEO, Simon Noon, stated:
“We are delighted to have secured support in the form of binding offtake and project
financing from a party of Trafigura’s calibre. Throughout what has been a highly competitive
offtake tender process, Trafigura has demonstrated a willingness to work constructively with
the Company to deliver a result that is in the best interests of the Project.
ASX Announcement Page 2
The binding Offtake Agreement and Prepayment Term Sheet with Trafigura represents a
cornerstone of our targeted financing plan for Sorby Hills. We now look forward to further
progressing discussions with other prospective senior lenders with a view toward reaching a
final investment decision on the Project.”
“The opportunity to secure high-quality concentrate from the Sorby Hills project is an exciting
prospect for our lead trading book. We look forward to seeing Boab’s management team
bring this project into production,” Trafigura’s Global Head of Zinc and Lead has stated.
Background Information
Sorby Hills is located 50km from the regional centre of Kununurra in the East Kimberley of
Western Australia and has access to existing sealed roads to transport the concentrate 150km
from the site to the facilities at Wyndham Port.
The Project comprises a Mineral Resource of 47.3Mt containing 1.5Mt Pb at 3.1% and 53Moz
Sliver at 35g/t (Table 1). The current Sorby Hills mine plan comprises 18.3Mt at 3.4% Pb and 39g/t
Ag of which ~83% is classified as an Ore Reserve (Table 2).
On 6 June 2024, Boab released the results of a Front-End Engineering & Design Study (“FEED
Study” on the Project showing strong pre-tax economics including C1 operating costs of
US$0.36/lb payable Pb (incl. a net Silver credit of US$0.37/lb payable Pb), NPV8 of A$411M, IRR
of 37%, A$778M free cash flow, and an average annualised EBITDA of A$126M. Pre-production
capital costs were estimated to be A$264M.
With operating costs covered by revenue generated by a historically non-volatile lead price, the
Project free cash flow is exposed to movements in the price of silver.
Sorby Hills is being developed via a joint venture between SHPL (75%) and Yuguang (Australia)
Pty Ltd (“Yuguang”, 25%). On 23 September 2024, Boab announced that it had executed an
agreement with Yuguang to acquire their interest in the Project subject to reaching a final
investment decision on the Project (“JV Acquisition Agreement”.
On 25 October 2024, the Company indicated that it was proactively assessing multiple
opportunities to materially reduce the upfront capital expenditure for Sorby Hills (“Capital Cost
Reduction Initiatives”. The identification of available second-hand process plants has been
one such initiative and the potential purchase of the available DeGrussa plant has been
deemed the most technically suitable option for Sorby Hills. Over the coming quarter, Boab
will work closely with preferred EPC Contractor GR Engineering Service (“GRES” to undertake
a thorough review of the DeGrussa process plant and assess the technical and economic
benefit of its potential incorporation into the Sorby Hills Project.
The Offtake Agreement and Prepayment Term Sheet executed with Trafigura represents
another key milestone towards a final investment decision on Sorby Hills and a cornerstone of
Boab’s financing solution for the Project. The result follows a very competitive process in which
multiple parties including other global traders and smelters expressed strong interest in the
Sorby Hills concentrate.