Fresh twist in battle for Boseto Mine

Brian Benza
Staff Writer | Friday May 24, 2013 00:00

The decision is a fresh twist to the long running battle for the mining company, whose key asset is its wholly owned Boseto Copper project, located near Maun. In a statement released to the BSE and the Australian Stock Exchange, where the company has a primary listing, Discovery said that it has opened its books to several bidders, including erstwhile suitor CFC.

Two banks, UBS and Credit Suisse, are handling the bidding process.Discovery Metals said it had signed confidentiality agreements 'with a number of parties to date' and that it would be accepting binding proposals until June 10.

CFC, according to Discovery, has tabled a new proposal of   between 35 cents and 40 cents a share, which is significantly lower than the initial takeover offer of $1.70 a share offered last October in the first bid for the junior mining company.

CFC currently owns 13.7 percent of Discovery Metals. Discovery resumed trading after a three-week suspension while the company tried to stitch together a refinancing, involving a $75 million equity raising -  a $25m share placement to a cornerstone investor and a $50m accelerated non-renounceable issue to existing shareholders - and a $225m high yield bond issue in the US.

Discovery share prices have fallen by 85 percent in the past year, closing at P3.96 on the BSE on Wednesday.The Boseto Mine, which was commissioned last year, currently produces 36,000 tonnes of copper and 1.1 million ounces of silver in concentrate per year. But plans are underway to ramp up production to 50,000 tonnes per year through an expansion of plant capacity by 66 percent from 3 million tonnes per annum (mtpa) to 5mtpa by 2015, based on the expanded mineral resources.

Discovery Metals has prospecting licences covering 11,872 km2 along the Kalahari Copperbelt. In an effort to protect future revenues from commodity prices fluctuations, Discovery says that as at 31 December 2012, the company had hedged approximately 47 percent of copper and 65 percent of silver providing downside price protection on a portion of the Boseto production.

Approximately 53 percent of the copper production will be sold at spot market prices. The total hedged quantities are 37,521 tonnes of copper and 1,620,939 ounces of silver.Copper prices have weakened over the past six months, but the metal's use in everything from high-end electronics to plumbing means it is closely watched by traders as a barometer for the global economy.