Boseto Mine on the brink as losses deepen
Brian Benza | Wednesday March 5, 2014 10:05
This was up from the US$14.6 million for the corresponding period in 2012 as the company struggles to find fresh capital injections to counter mounting debts.
The reported loss reflects operating revenue and expenses from its flagship Boseto Mine, including depreciation from July 1 2013, the date from which the company determined that all key ramp up metrics at the mine had been achieved except for the delivery of ore.
Discovery is saddled with debts of over $150 million and is currently negotiating repayment waivers with its creditors, the latest one granted last week, in which all interest owing up until February 28 2014 has been deferred until March 15 2014.
In the absence of the debt repayment reprofiling and fresh capital, Discovery says the mine would be unable to operate as a going concern.
Saddled with a $153 million (P1.3 billion) debt, the mining company is going through a financial strain largely stemming from last year’s collapse of the $100 million (P870 million) recapitalisation deal from a Singaporean firm, Blumont.
The company says it is now seeking a change of control or recapitalisation transaction with a number of parties completing due diligence on the Discovery.
In a statement accompanying the results, Discovery says although financing facilities are in default, the financial forecasts of the project together with the ongoing change of control, equity raise and refinance process and ongoing support from the lending syndicate, is enough to ensure that the company will operate as a going concern for the next 12 months.
“If a change of control transaction is not successful, the company will need to rely on the support of its lenders to reprofile the existing debt and provide working capital resources. Should the lenders not agree to this the company will be unable to continue as a going concern,” says the company.
In a statement, the company said that loan Interest for the period amounted to US$7.5 million including US$3.0 million of previously capitalised borrowing costs expensed.
“During the period, sales revenues from the project of $54.5m were recognised along with $14.6m from hedge settlements. Borrowing costs of $7.5m were recognised together with $9.5m of depreciation on project assets,” says Discovery.
The company also said salaries and consultants have reduced primarily from $6.1 million to $4.2 million due to a reduction in consultancy costs following the conclusion of the ramp-up phase of the Boseto Operation.
Early this year, Discovery Metals announced a restructuring of operations at the Boseto copper project, which resulted in the lay-off of 15% of the workforce.
Low international copper prices coupled with low ore grades recovered at Boseto has also exacerbated the company’s difficulties.
Copper prices have slumped to about $3.20 per pound from about $4.30 at the time the Bankable Feasibility Study (BFS) was compiled.
Since commissioning in June 2012, the project has faced numerous challenges including inability to produce the quantities initially planned. Currently the company produces 1,500 tonnes of copper from the initial target of 3,000 tonnes established in the BFS.
In the year up to June 2013, the company reported a loss of $224 million (P1.95 billion) after booking a $206 million write down on the Boseto project.