Pilbara Minerals (ASX:PLS) looks to have secured a large enough funding package to help it navigate the ongoing downturn in lithium.
Even after repaying two existing debts totaling more than half a billion dollars, the new $1 billion facility, along with over $1 billion in cash on hand, will provide the country’s largest independent lithium player with a solid lifeline.
The new A$1 billion revolving credit line from a group of local and international banks includes two separate facilities of $500 million each, with tenors of four years and five years, respectively.
The proposed facility was first revealed in Pilbara’s annual results statement in August.
As part of the revamp, Pilbara stated it will repay its existing 10-year, $250 million debt facility with Export Finance Australia and the Northern Australia Infrastructure Facility, as well as its five-year US$113 million ($168 million) syndicated debt facility, in order to facilitate the financial close of the RCF.
Pilbara had $1.6 billion in cash as of June 30, and Tuesday’s statement didn’t indicate how the repayments for these two existing debt deals would be sourced.
The company did not specify the interest cost but mentioned that it would be based on a floating base rate plus a margin linked to a senior net leverage ratio.
The lender group includes BNP Paribas, Commonwealth Bank, National Australia Bank, HSBC, Shanghai Banking Corporation, Societe Generale, and ING Bank.
Pilbara's Chief Financial Officer, Luke Bortoli, stated that the establishment of the revolving credit facility is an important step in the maturation of Pilbara Minerals’ capital structure.
"The new corporate facility replaces Pilbara Minerals’ existing loan facilities, offers significant flexibility for future funding, and bolsters the company’s already strong liquidity position," Bortoli said.
"The establishment of the RCF demonstrates the strength of Pilbara Minerals’ balance sheet, notwithstanding the current market environment."
The terms of the new package give Pilbara greater flexibility in using the cash. With the cash on hand (minus the repayments) and the new facility, Pilbara would have total liquidity of just over $2 billion, which should be sufficient to get the company through the current downturn and finance its ambition to build output to the planned one million tonnes of spodumene a year, as well as continue with two other projects at its WA mining operation.
