Wanetsha Mosinyi
14 November 2008
African Copper has announced that it has exercised and sold all of its copper put options for US$4.75 million.
The company said in a statement on Wednesday that proceeds will be used to fund its working capital requirements at Mowana Mine near Dukwi.
In May 2007, African Copper took the decision to implement revenue protection for the Mowana Mine by purchasing copper put options for up to 5,850 tonnes of copper at a strike price of US$3.00/lb, divided evenly over the period between April 2008 to December 2008, which equates to 650 tonnes per month over the eight month period.
(Put options are pre-determined price tools that protect against market fluctuations.)
These copper put options are purely a financial instrument to offer revenue protection and are not dependent on or tied to production from Mowana Mine. As copper traded above US$3/lb for the period April to September 2008, the put options for these periods were not exercised.
In light of the current weakening of the copper price, African Copper decided to exercise the remainder of its put options for a total of US$4.75 million. Last month, African Copper said the delays in shipping first copper concentrate had impacted on the company's working capital position.
The company expects to begin receiving the proceeds of the sale of copper concentrate at the end of November.
In order to address its immediate working capital requirements, the company is currently seeking to raise up to Pound Sterling 8.75 million ($US 15 million) to fund its ongoing needs.
"Accordingly, detailed discussions are being held with a number of potential debt and equity capital providers," the company said.
Copper concentrate deliveries commenced and the first shipment left by road on October 22, 2008 from a current discharge stockpile of around 800 tonnes. Copper concentrate shipments had been planned to commence in late September 2008 following earlier delays from the original projected commissioning date of June/July 2008.
Shipments are expected to accelerate as the processing facility reaches full production. Currently the plant is processing approximately 2,000 tonnes of ore per day and is expected to reach its full capacity during this month.
The Company has revised its 2008 production forecast of approximately 5,000 tonnes of copper in concentrate as it now expects to produce around 2,300 tonnes of copper in concentrate during 2008 as a result of delays in shipping first concentrate.
MRI Trading Ag is the purchaser of all copper concentrate from the Mowana Mine under the terms of a five-year off-take agreement.
Management at the Company is said to be focusing on optimising current operations through an aggressive programme to reduce operating costs and adjust mining rates with a view to maximising operating margins.
"Mining of the Mowana deposit to date has been successful. Just under one million tonnes of material has been mined and stockpiled to date with over 300,000 tonnes grading 1.7 percent copper," the Company said.
This represents around twelve months throughput for the plant based on the mill and plant capacity. As a result, the Company is holding surplus stockpile for its immediate requirements and management has therefore decided to reduce its mining rate until the balance between the size of the stockpile and the processing rate is optimised.
This will reduce the stockpile gradually until it can be maintained at 150,000 tonnes representing approximately two months of production.
Due to current market conditions ,management also decided to conserve capital and postponed the finalisation of the expansion plan. This plan contemplated, among other things, capital expenditure commitments for the implementation of a Dense Media Separation (DMS) plant, which will be deferred until market conditions improve, African Copper said.
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