Straits Resources will pay $US120 million ($A117.62 million) to change an existing sales deal for copper from its Tritton mine in NSW to reflect lower offtake terms prevailing in the concentrates market.
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Shares in Straits were up one Australian cent, or 1.25 per cent, at 81 cents at 1218 AEST, compared to losses in the broader market of about one per cent.
The miner has signed a non-binding agreement with the investment bank's metal commodities trading arm, JP Morgan Metals and Concentrates, providing the basis for a binding deal that will allow Straits to restructure the existing offtake agreement.
"In exchange for an upfront cash payment of approximately $US120 million, JP Morgan will agree to a termination of the current offtake agreement, and will enter into a new offtake agreement ... for all copper concentrates from the mine until the end of 2013," Straits said on Tuesday in a statement.
The new agreement would be priced in line with the significantly lower prevailing market offtake terms for copper concentrate from Tritton.
"The market is aware that Straits and its Tritton copper mine suffer from the legacy of significantly `out of the money' offtake terms entered into by the previous owners prior to the original Tritton company's IPO (initial public offer) in 2002," chief executive Milan Jerkovic said.
He said the offtake deal restructure allowed Straits to provide "a cleaner and more transparent investment opportunity to the market".
Straits will have the option within six months of signing the binding agreement to terminate the new sales deal, effective from July 1 next year, and must pay $US9 million to JP Morgan to exercise this option.
To pay for the deal restructure and provide Straits with working capital, it has signed a credit approved term sheet for a five-year debt facility with Standard Chartered Bank for $US120 million.
Credit Suisse has provided a separate credit approved term sheet for a $US50 million silver loan facility for Straits' Mt Muro gold and silver mine in Indonesia.
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20/09/2011 21:02Sydney, Australia. 20 September,2011
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