African Copper posts P252 million profit

MBONGENI MGUNI
Staff Writer | Thursday February 18, 2010 00:00

Last January, operations at Mowana were suspended after the UK company suffered a cash flow crisis arising from depressed copper prices.

The suspension came four months after the mine shipped its first concentrate. However, Zambia Copper Investments bailed out the troubled mine last May, enabling the resumption of production in August 2009.

On Tuesday, jubilant AfCopper executives announced that Mowana was back on track, netting P28.7 million from its first sale of copper concentrate after the August 2009 resumption. AfCopper's results - for the fourth quarter 2009 and the year ending December 2009 - were also boosted by a reversal of impairment losses, owing to the mine's brighter prospects.

'This has been an important period for African Copper and I am delighted with the progress we have made on all fronts in the fourth quarter after what was a testing time for the mining sector.

We have recommenced operation at our flagship Mowana Mine and are making adjustments towards reaching full commercial production levels.

'On the financial side, we have started to produce revenues and our net loss has reduced substantially, a result of the reversal of heavy impairment losses recognised on the Mowana Mine property in 2008.

This reversal reflects favourable changes in the underlying estimates of expected future cash flows. With the return of favourable copper prices, and a ramping up of production, we look forward to the next 12 months with genuine excitement,' said AfCopper's Chief Financial Officer, Brad Kipp.

AfCopper's directors reversed impairment losses worth P322 million, following a June 2009 review of mining assets which showed that previous threats to future profitability no longer existed.

According to its financials, Mowana produced 4 344 million tonnes of copper concentrate after resuming production between August and December 2009, meeting its targets for the copper recovery rate.

AfCopper was able to leverage on copper prices which hit a 17-month high last month, marking the base metals return to profitability. AfCopper was also able to negotiate better payment terms in its five year sales contract with MRI Ag, a Swiss-based base metal trader.

'Throughout the fourth quarter of 2008, and continuing into early 2009, global financial and commodity markets were characterised by volatility and falling copper prices.   'However by early August 2009 copper prices had rebounded to their highest levels since October 2008 and copper has been at the forefront of the rally in the base metals sector. 

Until the world's economic outlook becomes clearer, mining companies will likely experience fluctuations in energy and resource prices and currency volatility,' reads a statement to accompany the company's results.

AfCopper is working on securing a mining licence for its Thakadu prospect, while logistical studies are underway on its Matsitama project.

The junior miner is planning to ramp up to full production this year, which will improve its cost to revenue fundamentals. For 2009, AfCopper's operating costs were P47 million, compared to sales revenue of P28.7 million and this from the concentrate shipped out in the fourth quarter.