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The China Development Bank (CDB) is fully supportive of Hanlong Mining’s AUD 1.65bn bid for Sundance Resources [SDL:AU], a source close to the lender told dealReporter.

A source close to Hanlong added that the Chinese group remains in discussions with the CDB and still expects the credit approved term sheet prior to 29 February 2012, before the scheme of arrangement is tentatively scheduled to begin.

Hanlong also remains in talks with the National Development and Reform Commission (NDRC), whose approval is expected before the February deadline, given that its green light is needed before the CDB can advance funds to the company, the source added.

The CDB has already signed-off on the deal internally, and the lender, which is the main financier for all Chinese outbound acquirers, believes that potential risks around the deal have been adequately addressed, the source close to the CDB explained.

Hanlong will be in charge of all the follow-up financing of the Mbalam project development, which may require upwards of USD 7.8bn, said the source close to Hanlong. Sundance said in April that the first stage of development would cost USD 4.6bn. While the feasibility study for the second stage remains ongoing, it is expected to be funded from cash generated from stage one with a capital cost of approximately USD 3.1bn.

The financing of USD 7.8bn is expected to be further discussed after Hanlong completes the Sundance acquisition in May next year, the CDB side source said. Another source close to the situation clarified that the CDB was treating the acquisition financing separately to the infrastructure spending required post-acquisition. NDRC approval would only be needed to fund the transaction at this stage, this source added.

The CDB loan will be arranged via its branches in Sichuan, where Hanlong is based, and Hong Kong.

“All the ducks are getting into a row,” another source familiar with the situation said.

As reported by this news service, Sundance chairman George Jones is expected to meet with CDB officials this month. Jones previously said that the mining conventions are now expected to be put to parliament for ratification by the end of February or early March.

However, NDRC approval for the deal is not subject to the conventions being finalised, the source familiar with Hanlong said.

For all this, the sources point out that Hanlong is still not discounting the possibility of delays to the indicative timetable released in October, which calls for an April scheme meeting, given uncertainty around the time needed to secure the conventions.

It is understood that an update on the financing and conventions could come by the end of next week.

Meanwhile, the source familiar with Hanlong noted that the company is in early-stage discussions with several state-owned entities with regards to forming a joint venture for the construction of infrastructure for stage one of Mbalam. These discussions, however, are only expected to conclude following the completion of the transaction with Sundance.

The indicative timetable currently sets out the dispatch of the scheme booklet for 4 March, with a scheme meeting to take place on 10 April.

Sundance shares were trading around AUD 38c on Wednesday afternoon. Hanlong has offered AUD 57c per share