Avanti Mining Inc. (TSX-V:AVT) has struck an agreement with ThyssenKrupp Metallurgical Products GMBH, a German industrial trading company, which has agreed to buy half of the molybdenum produced at Avanti’s shuttered Kitsault mine.
The Vancouver mining company estimates the agreement could be worth $2.7 billion over the life of the mine, located 200 kilometres north of Terrace.
The mine will cost an estimated $1 billion to restart, and Avanti CEO Craig Nelsen said the agreement with ThyssenKrupp should help secure some of the financing needed.
“It helps us secure a significant amount of the project debt,” he told Business in Vancouver.
The quantity of molybdenum that would be sold and consumed under the agreement Germany qualifies Avanti for a German government-backed loan of $300 million, Avanti said.
The mine has a certificate from the BC Environmental Assessment Office, but because the application was made before the federal government streamlined the environmental review process, it still must pass a federal environmental review.
The Kitsault mine opened in the 1970s, creating the town of Kitsault overnight. But it shut down a few years later, after molybdenum prices fell. Demand for molybdenum, which is used in steel-making, has increased, due largely to demand in China.
The town of Kitsault was bought by American millionaire, Krishnan Suthanthiran, who has been trying to market it – first as an artist’s retreat and, more recently, as a ready-made town to serve the oil and gas industry. But so far, Kitsault remains a ghost town occupied only by caretakers.
If all the necessary approvals are received by fall, Nelsen said the mine could be operating within 25 months.
The Nisga’a First Nation has launched a challenge of the provincial government’s approval of the project through an environmental review.
