Financing

[Semmel]

Its time for a new thread. As Mark mentioned the three big problems to solve, one of them is Permits (we have a thread for that), customer offtakes (we dont have a thread for it yet as we dont know shit) and financing, which is this thread. We do have some information, but not quite enough to have a complete picture. Let me recap what we know first.

Our financing model for the 19.5ktpa Talnode-C mine can be loosely divided into 3 parts.

• Dept financing, which Talga said would be 60%
• Project equity financing, which is the remaining 40%
• Funding by government, which is a complete unknown
• Offtake partners contributing to mine funding

For the dept financing, we know some players:

• Nordic Investment Bank, Swiss Export Risk Insurance, which is always mentioned in connection with ABB, which provides the equipment for electric mining and machines for the refining facility. I am not sure, but I guess the Swiss Export Risk Insurance is there to cover costs to ABB in case of Talga default. So I am not 100% sure they provide any money. Maybe we can clear that up in the comments.
  
• Swedish Export Credit Corporation ("SEK"), fully owned by the Swedish government. So it can be seen as support by the government as Swedish political class very much wants the mine to happen.
  
• "A leading European Bank".. which can be about anyone. I guess they want to keep their cards close to the chest.

The project equity financing is probably connected to Mitsui. We did not heard much about the MOU lately and there is a lot of talk about Mitsui dropping out. This is obviously a possibility at this point. Something to keep in mind though is, that Talga intends to give away PROJECT equity, not COMPANY equity. Meaning, we will probably pay for this equity not in form of dilution but in form of reduced profits from the Vittangi mine, but that does not translate to dilution which would also apply to any future project.

We also heard about long lead items being funded ahead of time before project permits are received to not disrupt the timeline. There is very little information on that one.

Government funding, is very uncertain at this point. We know that the EU is interested in funding the project but .. we havnt heard much of it recently. There are renewable energy funding rounds discussed occasionally, but we dont know if Talga applied for any of them. This is a total wild card and I hope it primarily reduces the project equity part if it happens in time.

The funding by offtake partners is more a whish than solid information. A large up-front payment to fund the mine in form of a loan or convertable bond would be very welcome. However, I dont think its very likely to happen. But there is plenty of other projects that received funding this way.

 

[Semmel]

The reason why this thread is started now, is the ending MoU with Mitsui end of August. There is the possibility that Mitsui drops out, which obviously would have a negative impact on the share price. Its only 10 more days on the clock and we didnt hear anything. With these contracts, Talga typically waits until the last moment to say anything, so dont expect to see an announcement before August 30th. I would say the downside is quite limited on this, as many people would expect a dropout of Mitsui. On the other hand, if the MoU is extended, the share price is likely rising because the downside is expected. In a very unlikely event of a real contract, the share price has a very high upside. I would say this is quite an asymetrical situation, with more upside than downside but significant probability to the downside.

 

[ACinEur]

My question is why would Mitsui ‘drop out’? These type of agreements tend to be renewed/upgraded on the last day so guess we will know soon enough. Mitsui have had the opportunity to pull out before now…so I am expecting good news…Plus why would MT be on the ground now…

 

[Semmel]

My question is why would Mitsui ‘drop out’? These type of agreements tend to be renewed/upgraded on the last day so guess we will know soon enough. Mitsui have had the opportunity to pull out before now…so I am expecting good news…Plus why would MT be on the ground now…

Yeah, same here. I forgot to write that i think a drop out of Mitsui is quite a low probability. Mitsui knows the Mining industry and will see that talga is on a good track

 

[TentCity]

Yeah, I’ve been in the camp of ‘Mitsui more likely to drop out than to stay’ for a while now, but after Mark’s comments on the recent investment webinar, stating very confidently that they are acutely aware of the timeframes to production and ordering long lead times is all in hand, leads me to believe that either Mitsui or another mystery parter is lined up on the equity side to provide this financing shortly.

Mitsui could be a valuable ally to co-fund and source many of the critical long lead items from Japan given their extensive networks and navigating the supply chain/freight bottlenecks.

As you say Semmel, based on Talga’s history, we’ll find out on Aug 31 - but it would be nice for a change for a proactive early announcement and would help explain Mark’s sudden emergence and confidence he is showing on Twitter recently and being on the ground in Sweden!

 

[Stares_into_Space]

If Talga was financed by Credit Suisse and then the Bank went under how would that impact Talga? I thought I saw that was one possible avenue for financing so I was curious how things would look if everything went really sideways

 

[Semmel]

If Talga was financed by Credit Suisse and then the Bank went under how would that impact Talga? I thought I saw that was one possible avenue for financing so I was curious how things would look if everything went really sideways

As far as I know there is no connection to CS. It was Swiss Export Risk Ensurance and to the best of my knowledge, they were ensuring the purchase of ABB equipment, i.e. if Talga was unable to pay, they would step in. But I have not seen any documents about that, its what I estimate from available information.

Also, the US OTC markets didnt get the memo about the trading halt. TLGRF is down 11% at moment to $0.77.

 

[Stares_into_Space]

As far as I know there is no connection to CS. It was Swiss Export Risk Ensurance and to the best of my knowledge, they were ensuring the purchase of ABB equipment, i.e. if Talga was unable to pay, they would step in. But I have not seen any documents about that, its what I estimate from available information.

Also, the US OTC markets didnt get the memo about the trading halt. TLGRF is down 11% at moment to $0.77.

Thanks for the clarification. Couldn't remember the exact Swiss connection.

Definitely kicking myself today for spending my only available bit of cash on shares at $0.90 after last week's announcement. Today looks like a great day to jump in on more

 

[Micreg]

Article from today’s Australian Financial Review:​

Europe throws down gauntlet in stoush over Biden’s green cash​

Hans van LeeuwenEurope correspondent
Jan 18, 2023 – 2.47am
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Davos, Switzerland | The European Union has unveiled its retaliation against US President Joe Biden’s $530 billion Inflation Reduction Act, with a pledge to boost subsidies and cut red tape for European green-technology companies.

The wide-ranging “green industrial plan”, unveiled by European Commission President Ursula von der Leyen in Davos late on Tuesday (AEDT), could deliver a fillip to the phalanx of ASX-listed players looking to develop mines, factories or processing operations in Europe.

European Commission President Ursula von der Leyen at Davos, as she unveils the riposte to President Joe Biden’s Inflation Reduction Act. Bloomberg

Many of these companies, in areas ranging from battery making and rare earths to lithium extraction and processing, have been chafing at the lengthy and complex processes for getting planning approvals.

They could also benefit from new pots of public money, either from Brussels directly or from national European governments freed from tight EU restrictions on state aid to their businesses.

Ms von der Leyen said the EU would legislate to speed up permitting processes, and to temporarily loosen the state aid regime so that waivers to the bloc’s anti-subsidy rules could be granted more readily and quickly.

 

[Micreg]

Fin review continued…

Many of these companies, in areas ranging from battery making and rare earths to lithium extraction and processing, have been chafing at the lengthy and complex processes for getting planning approvals.

They could also benefit from new pots of public money, either from Brussels directly or from national European governments freed from tight EU restrictions on state aid to their businesses.

Ms von der Leyen said the EU would legislate to speed up permitting processes, and to temporarily loosen the state aid regime so that waivers to the bloc’s anti-subsidy rules could be granted more readily and quickly.

Because smaller European countries are less able to subsidise their companies, she also flagged a slew of fresh Brussels funding for critical green projects.

European leaders have been complaining for months that Mr Biden’s big-spending IRA, coupled with soaring energy costs and wage bills at home, could lure the Continent’s emerging green industries to quit Europe and head for the US.

“To keep European industry attractive, there is a need to be competitive with offers and incentives that are currently available outside the European Union,” Ms von der Leyen said.

“We need aggressive attempts to attract our industrial capacities away from China and elsewhere.”

Marco Alvera, CEO of hydrogen vehicle maker TES, said competition between the US, China and Europe on green technology would benefit business, driving down the cost of inputs such as electrolysers. But the European producers needed support.

“Europe was at the cutting edge, and now it is being overtaken by China, the Americans and the Middle East. Europe really needs to catch up,” he told The Australian Financial Review.

“They talk about relaxing state-aid rules. The US is putting almost $US400 billion on the table. There is still a big gap to fill.”

Taking aim at China, US​

Ms von der Leyen was much more direct in criticising Chinese state subsidies and restrictions on market access, while taking a more conciliatory tone towards Washington.

“Certain elements of the design of the Inflation Reduction Act raised a number of concerns in terms of the targeted incentives for companies,” she said.

“This is why we have been working with our United States friends to find solutions, for example so that EU companies and EU-made electric cars can also benefit from the Inflation Reduction Act.”

She framed the US and EU initiatives as jointly leading the way on tackling climate change through technology, and said the two should “avoid disruptions to trans-Atlantic trade and investment”.

“We should ensure our respective incentive programs are fair and mutually reinforcing,” she said, proposing that the two blocs could create economies of scale across the Atlantic, and also set common standards.

The White House has so far offered only reassuring words in response to European efforts to get Washington to mitigate the impact of the IRA on its industries. Brussels and other European capitals hold out little hope that Mr Biden will offer substantive concessions.

Instead, the EU has now thrown down the gauntlet. “We Europeans also need to get better at nurturing our own clean-tech industry,” Ms von der Leyen said. “Future investment decisions will be taken depending on what we do today.”

Opening the coffers​

On the plan to simplify and speed up planning approvals and restrictions on subsidies, Ms von der Leyen specifically talked about issues with the supply chains for lithium and critical minerals, where a lot of Australian activity in Europe is concentrated.

She flagged the prospect of more tax breaks, alongside “targeted aid for production facilities in strategic clean-tech value chains, to counter relocation risks from foreign subsidies”.

The European Commission was “already working hard on a needs assessment” for this initial support.

Later this year, that first tranche of funds would be beefed up with “a structural solution to boost the resources available for upstream research, innovation and strategic industrial projects key to reaching net-zero”.

The Green Deal Industrial Plan, as she called it, also looks at skills and training, and pledges more EU effort to strike international trade deals and work at the World Trade Organisation on ensuring that “competition on net-zero ... [is] based on a level playing field.

 

[TentCity]

Fin review continued…

Many of these companies, in areas ranging from battery making and rare earths to lithium extraction and processing, have been chafing at the lengthy and complex processes for getting planning approvals.

They could also benefit from new pots of public money, either from Brussels directly or from national European governments freed from tight EU restrictions on state aid to their businesses.

Ms von der Leyen said the EU would legislate to speed up permitting processes, and to temporarily loosen the state aid regime so that waivers to the bloc’s anti-subsidy rules could be granted more readily and quickly.

Because smaller European countries are less able to subsidise their companies, she also flagged a slew of fresh Brussels funding for critical green projects.

European leaders have been complaining for months that Mr Biden’s big-spending IRA, coupled with soaring energy costs and wage bills at home, could lure the Continent’s emerging green industries to quit Europe and head for the US.

“To keep European industry attractive, there is a need to be competitive with offers and incentives that are currently available outside the European Union,” Ms von der Leyen said.

“We need aggressive attempts to attract our industrial capacities away from China and elsewhere.”

Marco Alvera, CEO of hydrogen vehicle maker TES, said competition between the US, China and Europe on green technology would benefit business, driving down the cost of inputs such as electrolysers. But the European producers needed support.

“Europe was at the cutting edge, and now it is being overtaken by China, the Americans and the Middle East. Europe really needs to catch up,” he told The Australian Financial Review.

“They talk about relaxing state-aid rules. The US is putting almost $US400 billion on the table. There is still a big gap to fill.”

Taking aim at China, US​

Ms von der Leyen was much more direct in criticising Chinese state subsidies and restrictions on market access, while taking a more conciliatory tone towards Washington.

“Certain elements of the design of the Inflation Reduction Act raised a number of concerns in terms of the targeted incentives for companies,” she said.

“This is why we have been working with our United States friends to find solutions, for example so that EU companies and EU-made electric cars can also benefit from the Inflation Reduction Act.”

She framed the US and EU initiatives as jointly leading the way on tackling climate change through technology, and said the two should “avoid disruptions to trans-Atlantic trade and investment”.

“We should ensure our respective incentive programs are fair and mutually reinforcing,” she said, proposing that the two blocs could create economies of scale across the Atlantic, and also set common standards.

The White House has so far offered only reassuring words in response to European efforts to get Washington to mitigate the impact of the IRA on its industries. Brussels and other European capitals hold out little hope that Mr Biden will offer substantive concessions.

Instead, the EU has now thrown down the gauntlet. “We Europeans also need to get better at nurturing our own clean-tech industry,” Ms von der Leyen said. “Future investment decisions will be taken depending on what we do today.”

Opening the coffers​

On the plan to simplify and speed up planning approvals and restrictions on subsidies, Ms von der Leyen specifically talked about issues with the supply chains for lithium and critical minerals, where a lot of Australian activity in Europe is concentrated.

She flagged the prospect of more tax breaks, alongside “targeted aid for production facilities in strategic clean-tech value chains, to counter relocation risks from foreign subsidies”.

The European Commission was “already working hard on a needs assessment” for this initial support.

Later this year, that first tranche of funds would be beefed up with “a structural solution to boost the resources available for upstream research, innovation and strategic industrial projects key to reaching net-zero”.

The Green Deal Industrial Plan, as she called it, also looks at skills and training, and pledges more EU effort to strike international trade deals and work at the World Trade Organisation on ensuring that “competition on net-zero ... [is] based on a level playing field.

Great read - thanks for sharing Micreg.

This is exactly what i was referring to yesterday in my post. Look forward to seeing more details of specific support measures and timelines, but once again bodes very well for Talga and other Australian critical raw material companies operating in Europe!

Amazing to think debt funding wasn’t even an option on the table for Talga’s financing strategy just a couple of years ago and now they are pre-approved for up to 300 million Euro EIB loan, possible financing from the Nordic Investment Bank, Swedish and Swiss Export Credit Agenices. Today’s announcement demonstrates there could be even more support on the way to perhaps help fast track the expansion well beyond the 19,800tpa well before the end of the decade as per the conservative assumptions in the Euroz Hartley broker report.