Pacific Nickel Mines has signed a formal loan documentation and an amended sales agreement with Glencore International to support the development of the Kolosori Nickel project in the Solomon Islands.

Under the terms of the agreement, Pacific Nickel will secure a loan facility of up to $22m from Glencore that will be used to fund the pre-production works at the project.

The company will repay the loan in a tenure of three years, starting from the first shipment, without missing any of the scheduled repayments during the wet season months.

The loan comes with a competitive margin above the US Secured Overnight Financing Rate.

Early repayment of the loan is permitted without penalty, along with repayments affected due to a cash sweep mechanism, said the company.

Pacific Nickel CEO Geoff Hiller said: “Pacific Nickel Mines has now signed formal documentation with Glencore for a senior secured debt facility of up to $22m for the Kolosori Nickel Project.

“The company has established a strong working relationship with Glencore who, by executing these documents, have confirmed their commitment to the development of the Kolosori Nickel Project.

“The company anticipates that it will be in a position to effect an initial drawdown of $3m once the initial conditions precedent have been satisfied.”

In addition to the loan agreement, the companies signed an offtake agreement for the Kolosori Nickel Project for a period of six years.

The agreement is a take or pay contract for 100% quantity of mine production during the contract period.

The companies have agreed on a 1.5% DSO Nickel benchmark and adjusted for nickel and moisture bonuses or penalty payments.

Kolosori Nickel Project is an advanced stage direct shipping ore nickel laterite project located on Isabel Island in the Solomon Islands.

The project is closely located to the coast and requires no processing, a low capital route to direct shipping ore production and local landowner support.

It has been progressing to development after securing a Mining Lease in September last year.

The company has prepared a Definitive Feasibility Study (DFS) for the project, which was released in early February this year.

Hiller added: “This drawdown is expected to be imminent and will enable the company to materially advance the current development works.

“The balance of the facility is expected to be drawn down in due course to fund the ongoing development of the Kolosori Nickel Project. The company believes that capital payback will be achieved in under 12 months.”