Queensland Pacific Metals advances financing for its 'green' Townsville Energy Chemicals Hub Project

Queensland Pacific Metals Ltd (ASX:QPM) (FRA:4EA) is advancing discussions with a number of parties pertaining to debt and equity funding for its 'green' Townsville Energy Chemicals Hub (TECH) Project in Queensland.  The company believes achieving success in the project feasibility stage will increase its value and open doors to funding opportunities for the project construction.  Its funding options include traditional equity investors, strategic investment by partners/offtakers, government grants, including manufacturing grant and R&D tax incentive.  The company is pushing ahead to turn into a producer of battery chemicals in Australia, as well as positioning the TECH Project to be a world-leader in sustainable nickel production as the “exceptional greenhouse gas life cycle data” makes it even more attractive to investors.  Final battery chemical product In April 2021, the company successfully completed bench-scale test work to produce nickel sulphate from the nickel-cobalt mixed hydroxide precipitate (MHP) produced at its pilot plant operations.  MHP is currently the preferred intermediate nickel product to refine into nickel sulphate for batteries. QPM managing director Stephen Grocott said: “We have now completed the full process from a raw ore source to a final battery chemical product.  “The Australian Government is trying to develop the nation’s capability for advanced manufacturing and the TECH Project is the perfect example of a project that would fit this bill.” The assay results were better than the company’s targets for all elements and based on industry specifications, the results satisfy the strictest battery specifications for potential off-takers. This is an important milestone for QPM as the company has now produced battery spec nickel sulphate from a bulk sample of representative nickel ore sourced from its New Caledonian ore supply partners. QPM will now undertake pilot-scale test work for the production of nickel sulphate from its remaining MHP.  The company will also continue to work with CSIRO on the assessment of an alternative refining flowsheet that may result in potential process savings.    Green credentials The company added another feather to its cap after the findings of an interim report into greenhouse gas (GHG) intensity of its TECH Project confirmed low carbon dioxide emissions.  Minviro, an international company specialising in life cycle assessment of mining and mineral processing projects, estimated the TECH Project’s carbon dioxide emission will be 36% lower than the industry average calculated by the Nickel Institute for nickel sulphate production.  There is potential for the carbon dioxide emissions to be further reduced and even have net-negative emissions, if its gas supply is derived from vented/flared gas at existing Queensland coal mines.  LG Energy and POSCO equity investment Earlier in June 2021, the company entered into a binding agreement with LG Energy Solution (LGES) and POSCO GEM 1ST FUND for a combined equity investment of US$15 million. LGES will invest US$10.5 million (99,235,889 QPM shares) and POSCO will invest US$4.5 million (42,529,667 shares) and the shares will be issued at a price of A$0.1364 - a premium of 16.8% to the 1-month VWAP of QPM shares. Post completion of the transaction, the ownership interest of LGES and POSCO in the company will be 7.5% and 3.2%, respectively – while LGES and POSCO will be subject to a 12-month escrow on their shares. Funds received from the equity investment will be used to advance the TECH Project, including bringing forward detailed design work, which will facilitate the earlier placement of long-lead time plant and equipment. Offtake deals The company also entered into binding offtake agreements for the sale of 10,000 tonnes contained nickel and 1,000 tonnes contained cobalt from its TECH Project with LGES and POSCO. This is a major milestone as LGES and POSCO are both highly credible and bankable counterparties, which will significantly assist QPM’s ability to fund the TECH Project. Their combined offtake quantities will account for the majority of production at the TECH Project, giving QPM the baseload customers it needs to underpin development. Initially, nickel and cobalt will be supplied to LGES and POSCO in the form of mixed hydroxide precipitate (MHP), until QPM completes a commercial production certification process for the TECH Project. This certification process is expected to take 9 to 12 months and once completed, all sales will be in the form of nickel sulphate and cobalt sulphate. Validation for company QPM's Grocott said: “The ability for QPM to attract and establish business relationships with companies of the calibre of LG Energy Solution and POSCO is validation for our company and what we are trying to achieve with the TECH Project. “We have developed excellent relationships with LG Energy Solution and POSCO and look forward to building on these for years to come.” The investment is seen as a vote of confidence from two world-class battery manufacturers and now sees a majority of nickel and cobalt production now contracted. Overwhelming demand for SPP The company upscaled its share purchase plan (SPP) from $3 million to $5 million following an overwhelming response from shareholders. Despite closing the SPP early in April 2021, the company received valid subscriptions for $10.6 million, and as a result, the company’s board decided to upscale the amount raised to $5 million. Funds raised in the SPP will be put towards initiatives that will assist with the acceleration and advancement of the TECH Project. Infrastructure and supporting services The company is in advanced talks with the Port of Townsville for berth access and the development of warehouse for ore stockpile to unload cargo. A total of A$12 million has been committed by the government to upgrade road infrastructure to Lansdown. There is confirmed significant availability in gas pipeline owned by Palisade and it has a memorandum of understanding with Blue Energy Ltd (ASX:BLU) (OTCMKTS:BUENF) (FRA:6QB). QPM is in ongoing talks with other gas suppliers, including green gas suppliers. It is also looking at solar power to reinforce the TECH Project’s green credentials, including using the existing Ross River solar array and the planned 400MW Edify solar station. Significant power will come from co-gen, which massively improves energy and greenhouse efficiency. As for water, it plans to use the existing Haughton River water pipeline. Approval works The company has already started approval works with the appointment of highly experienced EMM Consulting. The Lansdown Eco-Industrial Precinct has been re-zoned as heavy industrial and the company is working closely with the Office of Co-Ordinator General in Queensland. QPM is confident an environmental impact statement (EIS) approval will not be required, therefore compressing the approvals timeline. The company has received strong support to date from key Federal and State Governments and hopes to obtain approvals by the fourth quarter of 2021. It entered into a Cultural Heritage Management Agreement (CHMA) with the Bindal People in May 2021.