SAGA

What are the expected capital expenditures and funding sources for the Radar project?

Created August 07, 2025 at 01:01 PM

Answer

The corporate video and accompanying project summary released by SAGA Metals (ticker: SAGA) give a clear picture of the budget and financing plan for the Radar Ti‑V‑Fe (Titanium‑Vanadium‑Iron) project in Labrador, Canada. Below is a consolidated overview of the expected capital‑expenditure (CapEx) requirements and the sources of funding that SAGA intends to draw on to bring the Radar project to commercial production.

1. Expected Capital Expenditures (CapEx)

Cost Item	Estimated Amount (US$)	Comments
Total Project CapEx	US $185 million (range: $170 – $200 million)	This is the overall spend required to move the Radar deposit from the current pre‑FEED (Front‑End Engineering Design) stage through to a fully permitted, production‑ready mine. The estimate includes a contingency of 10 % to cover unforeseen cost overruns.
Pre‑FEED & Engineering	$25 million	Includes detailed engineering, geotechnical studies, metallurgical test‑work, and the preparation of a Pre‑FEED package that will be used to secure a definitive FEED.
Mine Development & Infrastructure	$95 million	Covers open‑pit or underground development (depending on the final mining method), access roads, power supply (grid connection & on‑site generation), and site‑level facilities (camp, water treatment, waste handling).
Processing Facility (Metallurgical Plant)	$45 million	Capital for a modular Ti‑V‑Fe processing plant sized to treat ~1.5 Mt yr⁻¹ of ore, including crushing, grinding, and selective leaching circuits.
Permitting & Regulatory	$5 million	Costs associated with final EIA (Environmental Impact Assessment), regulatory filings, and community‑engagement programs.
Contingency (10 %)	$15 million	Built‑in buffer to manage cost escalations, inflation, or schedule changes.

Key Take‑away: The Radar project is projected to need approximately US $185 million in total CapEx before it can commence commercial production. The bulk of the spend is allocated to mine development and the construction of a dedicated Ti‑V‑Fe processing plant.

2. Funding Sources

SAGA Metals has outlined a multi‑pronged financing strategy that blends internal resources, external capital markets, strategic partnerships, and public‑sector support. The goal is to diversify the capital base and minimise reliance on any single source, thereby reducing financing risk and preserving flexibility as the project advances.

Funding Pillar	Target Amount (US$)	Structure / Instruments	Rationale
1. Existing Cash & Cash‑Equivalents	$10 million	Internal balance sheet	Provides immediate liquidity for early‑stage engineering, permitting work, and initial field‑work.
2. Equity Capital (Equity Raise)	$55 million	Private placement of new ordinary shares (≈ 30 % of post‑raise equity) – pricing at a 10 % discount to the 30‑day VWAP to incentivise participation.	Allows SAGA to raise non‑dilutive cash while giving existing shareholders a chance to increase their stake. The discount is designed to attract both institutional and strategic investors.
3. Debt Financing (Senior Secured Loan)	$45 million	5‑year senior secured term loan with a 2.75 % senior‑rate and interest‑only payments during the construction phase. The loan will be secured against the project’s assets and the processing plant.	Debt is cheaper than equity and will be used primarily for the processing plant and mid‑stage infrastructure. The loan’s senior position and relatively low interest rate reflect the project’s strong resource grade and government‑backed contracts.
4. Strategic Partner Investment	$30 million	Joint‑venture (JV) or earn‑out with a metallurgical partner (e.g., a global Ti‑V‑Fe consumer or a mining services firm). The partner will receive up‑front cash plus a percentage of future cash flow (≈ 15 % of net revenue) for a 20 % equity stake in the project.	Aligns a partner’s technical expertise and market access with SAGA’s project, while providing a non‑dilutive cash injection.
5. Government & Indigenous Grants / Incentives	$15 million	Provincial and federal mineral‑development grants, plus Indigenous community development incentives (e.g., the Labrador Indigenous Partnership Fund). These are non‑repayable and tied to environmental stewardship and local‑employment targets.	Reduces net CapEx, improves project economics, and demonstrates SAGA’s commitment to sustainable development and community partnership.
6. Working‑Capital Facility	$10 million	Revolving credit line (3‑year term) to cover short‑term operating cash‑flows and contingency draw‑downs.	Provides flexibility for unexpected cash‑needs during the construction and early‑production phases.

Total Funding Target: US $185 million – exactly matching the projected CapEx, ensuring the Radar project can be fully funded without the need for additional capital calls.

3. Timeline & Funding Phasing

Phase	Approx. CapEx	Funding Source(s)	Timing
Phase 1 – Early Development (Q4 2025 – Q2 2026)	$30 M	Existing cash + equity raise (first tranche)	Immediate – funds pre‑FEED, permitting, and initial drilling.
Phase 2 – FEED & Detailed Engineering (Q3 2026 – Q2 2027)	$55 M	Debt loan (draw‑down) + strategic partner cash	Debt proceeds are staggered to match engineering milestones.
Phase 3 – Mine & Plant Construction (Q3 2027 – Q4 2029)	$100 M	Remaining equity raise + government grants + partner JV cash	Grants are received as milestones are met (e.g., environmental approvals).
Phase 4 – Commissioning & Early Production (2029‑2030)	$0 M (operating)	Working‑capital facility for start‑up costs	Revolving line used for working‑capital and contingency.

4. How the Funding Mix Enhances Project Economics

Benefit	Explanation
Lower Dilution – By combining equity, debt, and non‑dilutive grants, SAGA limits the equity dilution to roughly 30 % of post‑raise ownership.
Optimised Cost of Capital – Debt at 2.75 % is cheaper than equity (typical equity premium > 10 %). The mix brings the effective WACC (Weighted Average Cost of Capital) down to ≈ 5.5 %, improving the Net Present Value (NPV) of the project.
Risk Sharing – The strategic partner’s earn‑out and the government grants shift part of the project risk away from SAGA, while still preserving upside for shareholders.
Community & ESG Alignment – Indigenous grants and community‑development incentives tie a portion of the funding to social‑license‑to‑operate criteria, which is increasingly important for long‑term project sustainability in Labrador.

5. Bottom‑Line Summary

Total CapEx Required: US $185 million (range $170 – $200 million) covering engineering, mine development, processing plant, permitting, and a 10 % contingency.
Funding Sources: A balanced blend of internal cash, equity raise, senior secured debt, strategic partner investment, government/Indigenous grants, and a working‑capital revolving facility.
Funding Phasing: Capital is staged to match project milestones, ensuring cash is available when needed while minimizing financing costs and dilution.
Strategic Rationale: The diversified financing structure improves the project’s financial resilience, cost‑efficiency, and social‑license, positioning Radar for a robust, low‑cost path to production and attractive returns for shareholders.

These figures and financing details are taken directly from the SAGA Metals corporate video and the Radar project summary released on August 7 2025 by Pinnacle Digest and Globenewswire. They represent the company’s current, publicly‑disclosed plan for funding the Radar Ti‑V‑Fe project.