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African Copper: Deeper financial difficulty as it stops mining at Thakadu end May

Botswana African Copper, the AIM/Botswana-listed copper producer, will stop mining at its Thakadu mine in Botswana by the end of May 2015, placing it deeper in financial dire straits.

African Copper's Mowana plant which will process the Thakadu ore until June 2015
African Copper’s Mowana plant which will process the Thakadu ore until June 2015

Because of the early termination of the mine, coupled with unforeseen shortfalls in production, African Copper has a current working capital deficit. Although it has received a US$1.5 million working capital loan from the Copperbelt Development Foundation (CDF), the ultimate controlling party of the company, the Group estimates that it will require further funding in June 2015.

African Copper and its 84.19% holding company shareholder Zambia Copper Investments (ZCI) continue to take steps to secure additional long term funding.

Should the Group not secure additional funds and if current market conditions prevail, the board believes that African Copper may not then be able to continue as a going concern.

CDF loan facility

African Copper has interest bearing loans (including accrued interest) with ZCI totalling $100.3 million, excluding the existing convertible loan of a further US$7.18 million.

In light of ACU’s current working capital position, CDF provided the additional $1.5 million secured loan. The CDF loan facility has an interest rate of 9% per annum with the principal and accrued interest repayable in three equal monthly installments of $500 000 from 4 September 2015 and repaid in full by 5 November 2015.

Thakadu and future operational update

While mining at Thakadu will stop in May, processing from accumulated ore stockpiles will continue until the end of June at the company’s Mowana processing plant.

The Thakadu mine is nearing the end of its scheduled mine life and operations have recently revealed significant variability in ore grades compared to the geological resource model. The company believes that in order to confirm future grades it would be necessary to conduct medium depth high resolution drilling.

However, due to the short remaining mine life, a smaller mining footprint and the cost associated with such a drilling programme, it is unfeasible at this stage to continue the company states.

Looking forward, African Copper will continue to conduct a review of its operations with the aim of conserving cash and addressing its current and future funding requirements. As part of this review, its board will also continue implementing efficiency and cost optimisation measures.

African Copper has also made an interim mining and processing plan which covers a period of eighteen months following the end of operations at Thakadu in June 2015. This plan envisages mining Mowana ore at a significantly reduced rate, producing copper to cover operating costs while conserving cash through tight cost control.

This interim plan provides financial headroom for management to develop the new life of mine (LOM) for refinancing purposes and management has commissioned SGS International to conduct a plant optimisation feasibility study intended to increase crushing capacity and to increase feed grade to the mill through a Dense Media Separation plant.

Positive test work results have been received and the full Bankable Feasibility Study is continuing with a final report expected by end of September 2015.

Management has also started the process of new LOM planning with Golder & Associates having updated the Mowana resource model, which forms the basis for the optimisation work planned to be completed by end of June 2015.

African Copper and ZCI are in the process of appointing a financial advisor for restructuring of the balance sheet and securing the financing for the long term sustainability of the Group.

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