Canyon Secures $124M Backing to Buy Rolling Stock for Minim Martap Push

Strategic Financing Secured

Canyon Resources Limited (ASX: CAY) has taken a significant stride in advancing its Minim Martap Bauxite Project in Cameroon by securing an underwriting agreement worth nearly USD 124 million with its major shareholder, Eagle Eye Asset Holdings Pte Ltd (EEA). This funding is earmarked for the purchase of essential rolling stock, 22 locomotives and 550 wagons, along with a comprehensive five-year warranty and service agreement.

The underwriting agreement not only provides the full debt requirement but also includes an upfront fee of 3%, approximately USD 3.7 million, payable to EEA. The loan carries a 12% annual interest rate and a 60-month term, featuring a 12-month moratorium period during which no repayments are required. Repayments will commence 18 months after the first drawdown, structured in equal installments every six months over the remaining 48 months.

Logistical Backbone for Minim Martap

The acquisition of rolling stock represents around half of the capital expenditure outlined in the 2022 Bankable Feasibility Study, underscoring its critical role in the project's infrastructure. By owning its locomotives and wagons, Canyon aims to mitigate logistical risks, maintain tighter control over schedules and costs, and ensure operational reliability, factors that are especially vital given the project's remote location and the complexities of mineral transport in Cameroon.

Camalco Cameroon SA, Canyon’s local subsidiary, will be the borrower under this arrangement, drawing down funds as needed to finalize rolling stock orders. The company is also in advanced negotiations to secure access to CamRail’s rail assets, which will be integral to the project's transportation network.

Confidence Ahead of DFS Completion

The timing of this financing deal is notable, coming ahead of the expected completion of the Definitive Feasibility Study (DFS) in Q2 2025. Canyon’s CEO, Jean-Sebastien Boutet, highlighted that securing funding for these long-lead items signals strong confidence from both management and EEA in the project's viability and future success.

He emphasized that this milestone not only de-risks the project but also demonstrates Canyon’s commitment to rapidly advancing Minim Martap towards production. The underwriting agreement also includes provisions that prevent Camalco from encumbering the rolling stock, ensuring the assets remain unencumbered and dedicated to the project’s logistics.

Financial and Strategic Implications

The loan agreement contains a negative covenant restricting Camalco from creating security interests over the rolling stock and stipulates that any equity fundraising proceeds must be used to reduce the loan by at least 30%. Additionally, if Camalco secures third-party debt at a higher interest rate, EEA will cover the difference, or conversely, receive compensation if the third-party rate is lower.

This arrangement reflects a sophisticated financial structure designed to balance risk and maintain flexibility for Canyon as it progresses through the development phase. The ability to make early repayments without penalties further enhances financial agility.

Overall, this underwriting deal marks a pivotal moment for Canyon Resources, reinforcing its logistical foundation and financial readiness to bring Minim Martap closer to production, a project that holds significant promise in the bauxite sector.