Boab Metals Advances Sorby Hills Amid Financing and Regulatory Milestones, Risks Remain
Boab Metals has locked in a US$30 million prepayment facility with Trafigura for its Sorby Hills Lead-Silver-Zinc Project and received key environmental approvals, setting the stage for a final investment decision in the second half of 2025.
- US$30 million prepayment and offtake agreement signed with Trafigura
- Western Australian Government approves key environmental amendments
- Sorby Hills project FEED study shows strong economics with A$411M NPV and 37% IRR
- Boab targets final investment decision in 2H 2025
- Company exploring cost reduction initiatives including process plant acquisition and renewable power
Strategic Financing Milestone
Boab Metals Limited (ASX: BML) has taken a significant step forward in advancing its flagship Sorby Hills Lead-Silver-Zinc Project in Western Australia's Kimberley region. During the December 2024 quarter, the company executed a binding US$30 million prepayment facility and associated offtake agreement with global commodities trader Trafigura. This agreement is structured with a five-year term and an interest rate of SOFR plus 5%, including an 18-month interest-only period, providing Boab with crucial funding to support construction and development activities.
The offtake agreement secures Trafigura's purchase of 75% of the lead-silver concentrate produced, underpinning the project's revenue stream for approximately seven years based on current production forecasts. Notably, the offtake volume can adjust depending on Boab's financing strategy, offering flexibility should alternative funding sources be secured.
Environmental Approvals and Project Expansion
Complementing the financial progress, Boab received key environmental approvals from the Western Australian Government, allowing amendments to the Sorby Hills Project under Part IV of the Environmental Protection Act. These amendments permit an increase in open pit depth and mining production rates, aligning with the project's Front-End Engineering & Design (FEED) study parameters. This regulatory green light not only facilitates project expansion but also opens avenues for capital and operating cost optimisations, including water management and infrastructure rationalisation.
Robust Project Economics and Operational Outlook
The Sorby Hills FEED study, released earlier in 2024, highlights compelling economics with a pre-tax net present value (NPV8) of A$411 million and an internal rate of return (IRR) of 37%. Operating costs are estimated at US$0.36 per pound of payable lead, inclusive of a silver credit, supporting an average annualised EBITDA of A$126 million and free cash flow of A$778 million over the mine life. The project’s mineral resource base is substantial, with 47.3 million tonnes containing 1.5 million tonnes of lead and 53 million ounces of silver, underpinning a long mine life and steady production profile.
Cost Reduction Initiatives and Exploration Upside
Boab is actively pursuing strategies to further reduce capital and operating expenditures. Among these are the potential acquisition of Sandfire Resources’ DeGrussa process plant, which could lower upfront capital costs, and the feasibility of utilising 100% renewable grid power from the Ord hydroelectric plant to reduce operating expenses. Additionally, exploration success at the KEEP Zinc-Lead Prospect, confirmed through recent drilling, suggests promising opportunities for resource expansion beyond the current mine plan.
Looking Ahead to Final Investment Decision
With these milestones achieved, Boab is targeting a Final Investment Decision (FID) in the second half of 2025. The combination of secured prepayment funding, regulatory approvals, and ongoing cost optimisation efforts positions Sorby Hills as a compelling development opportunity in the lead-silver-zinc sector. Managing Director Simon Noon emphasised the momentum generated over the past six months and the company’s commitment to advancing the project towards production.
Bottom Line?
Boab Metals’ progress with financing and approvals sets a clear path toward a pivotal investment decision, but execution risks remain as funding and operational plans crystallise.
Questions in the middle?
- Will Boab secure additional financing beyond the Trafigura prepayment to fully fund Sorby Hills?
- How will fluctuations in silver prices impact the project’s free cash flow and overall economics?
- What is the timeline and likelihood for regulatory approvals under the federal EPBC Act following EPA amendments?
