Wanetsha Mosinyi
19 December 2008
African Copper announced Tuesday that it is proposing to seek authority from shareholders to issue up to 750,000,000 new ordinary shares as the company desperately needs US$15 million (P116.6 million) before January 15 to meet its immediate working capital needs.
The company, which operates Mowana Mine near Dukwi, said in the event that shareholders do not approve the issue or receive any alternative funding from other sources, it will not be able to meet its obligations and continue as a going concern beyond approximately January 15, 2009.
The copper producing company said failure to raise the cash means it will not be able to fund and implement its interim plan geared to maximising operating margins and minimising capital and expenditure.
As at 30 September 2008, the company had a working capital deficit of Pounds Sterling 0.6 million (P7.3 million).
"The prime contributors to this position were the delays in shipping first concentrate resulting from the commissioning delays combined with the costs of continuing to mine during this period," African Copper said.Business Week has been reliably informed that Mowana Mine started laying off employees last month due to the prevailing downturn in market conditions and working capital deficit.
The company also decided to conserve capital and therefore postpone the finalisation of the expansion plan, including the implementation of the DMS plant, until market conditions improve.
"In light of the constraints on the company's working capital, market volatility and uncertainty, management is planning to implement an aggressive programme to reduce fixed and variable operating costs."
The company initially expected to begin receiving the proceeds of sale of copper concentrate during the fourth quarter of 2008, and it has recently exercised and sold its copper put options, which generated proceeds of US$4.75 million (P36.9 million).
The directors consider that the funds from the placing (assuming the placing raises net proceeds of approximately US$15 million), together with cash expected to be generated by the Group from its operations, will be sufficient to fund the Group's commitments for the next 12 months from the date of the placing.
Commissioning of the processing facility at the open-pit Mowana Mine was completed during the third quarter of 2008. Following first concentrate production at the end of July 2008, the first shipment of copper concentrate was dispatched at the end of October.
The delays in commissioning and shipment of copper concentrate were caused by, among other things, delays in delivery of component parts and unexpected equipment failures, in particular, of major crusher components and mill bearings. These delays have resulted in production shortfalls, as a consequence of which the company has further revised its 2008 copper in concentrate production forecast from approximately 2,300 tonnes to approximately 1,500 tonnes.
Total open pit proven and probable reserves at Mowana Mine, is estimated at 14.8 million tonnes grading 1.11 per cent of copper.
On a year to date, African Copper is the worst performer on the Botswana Stock Exchange's (BSE) Foreign Equity Main Board and the market as a whole and is down by 95.4 percent.
The counter, which had appeared to be on the recovering mode during the past few weeks, tumbled again by 19.5 percent last week to 33thebe, shattering investors' hopes that the counter had bottomed up. On Tuesday, after the company released the circular, African Copper's share price dropped by 6thebe to end the day at 25thebe.
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