GABORONE, Feb 25 (Reuters) - Private equity firm Cupric Canyon's Khoemacau Copper Mines said on Monday it has secured $565 million of funding for the construction of its copper and silver mine in Botswana.
Sparsely-populated Botswana is the world's top diamond producer by value, but the government of the southern African country is trying to diversify the economy to reduce its dependence on the precious stone.
The funding for the Khoemacau Copper Silver Project includes a $275 million senior debt facility from Red Kite Mine Finance, as well as an advance payment of $212 million by Royal Gold for 80 percent of the silver produced from Khoemacau until "certain delivery thresholds" are met.
Royal Gold, a subsidiary of Royal Gold Inc, would - at Cupric's option - pay up to an additional $53 million for the remaining 20 percent of the silver produced at the mine, it said in a separate statement.
It added that it would pay 20 percent of the spot price of silver for each ounce delivered and will make available up to $25 million of subordinated debt towards the end of project development to fund potential cost overruns.
Khoemacau Copper Mines said that the first copper concentrate production was expected in the first half of 2021, with initial annual output averaging 62,000 tonnes of copper and 1.9 million ounces of silver.
"Securing the project funding package by partnering with two of the industry's leading global providers of mine finance, Royal Gold and Red Kite, allows us to move forward energetically with all project development activities," Khoemacau Copper Mines Chief Executive Johan Ferreira said in a statement.
Construction of Khoemacau was meant to start in 2017, but it was held up by delays in acquiring environmental permits as well as uncertainty around power supply.
Botswana currently has no operating copper mine after the closure and liquidation of state-owned BCL mining group in 2016 and the suspension of operations at Mowana open cast copper mine in 2018. (Reporting by Brian Benza Writing by Olivia Kumwenda-Mtambo; editing by Emelia Sithole-Matarise)