Australia vanadium mine gets A$ 200 mln in funding

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SYDNEY, Oct 2 (Reuters) Precious Metals Australia Ltd said today it had arranged for around A0 million (9 million) in funding needed to restart one of the world's largest vanadium mines after reaching a debt financing agreement with Merrill Lynch.

The financing package completes funding needed to bring the Windimurra vanadium mine and processing complex in far western Australia back into operation, after a hiatus of several years, without a need to dilute shareholder equity, the company said.

Located 600 kilometres (372 miles) northeast of the regional capital Perth, PMA's former partner, Xstrata , controversially shuttered the operation in 2004 after a slump in vanadium prices.

At the time, PMA claimed Xstrata had idled what was an economic mine in order to support the price of vanadium for the benefit of its South African vanadium assets. Xstrata said the mine was not economically viable at prevailing price levels.

Discovered in 1985, the mine contains the largest reported proven vanadium ore reserve in the world.At full production, PMA expects to supply about eight per cent of world demand for the steel-hardening alloy used in making oil drilling pipes.

PMA last year signed an equity and supply contract with Hong Kong-based commodities trader Noble Group for the life of mine production of vanadium. The A million deal gave Noble a 5 percent stake in PMA and a 10 percent stake in the project.

The Windimurra mine was developed in 1999 at a cost of around A0 million (3 million) and was once the world's largest primary source for the mineral, producing some 30 million pounds during its 2-{ years in operation.

REUTERS MP RK0802

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