GMA Garnet Group

Offtake Agreement and Financing with Mineral Commodities

May 2017

On 26 April 2017 it was announced that the GMA Garnet Group (GMA), an integrated garnet mining, processing, shipping, global marketing and distribution organisation providing the highest quality industrial garnet for the surface preparation and waterjet cutting industries, and Mineral Commodities Limited (MRC), a producer of zircon/rutile non-magnetic concentrate and ilmenite and garnet products, executed a binding heads of agreement (HOA) to amend the existing life of mine (LOM) offtake agreement (Offtake Agreement) for garnet concentrate from MRC’s Tormin mine in South Africa.

The agreed terms of the HOA represented a key milestone for both companies with MRC ensuring delivery of garnet concentrate to GMA under the Offtake Agreement and GMA securing additional stockpiling capacity at the Tormin site and the offtake from one of the key global garnet resources. Key terms agreed include:

  • GMA to accept delivery of a minimum 210,000 tpa for the LOM, excluding 2017 whereby GMA will accept delivery of 240,000 tpa;
  • US$5.2 million paid to MRC as pre-payment for initial garnet concentrate to be delivered to GMA during 2017;
  • MRC to provide designated lease areas to stockpile GMA delivered garnet concentrate, and to provide for security for pre-payments on stockpiled garnet concentrate inventory; and
  • Repayment of the existing loan provided by GMA to MRC, and related interest charges, to commence 30 days following execution of the HOA.

As announced by MRC on 26 May 2017, the companies subsequently entered into formal documentation.

Azure advised GMA on all aspects of the commercial arrangement including structuring, financial analysis/valuation, strategic advice and negotiation of the relevant commercial agreements.