African Copper warns of possible closure

The prevailing low copper prices could force closure of Mowana mine
The prevailing low copper prices could force closure of Mowana mine

Cash-strapped African Copper says it might not be able to continue operating if international copper prices, which are at their lowest since 2008, do not rebound.

The copper producer, which employs about 200 workers at its Thakadu and Mowana open pit mines in the northeast district, desperately needs additional money to fund operations.

The warning by African Copper comes shortly after Discovery Metals announced that it would shut its Boseto Mine near Maun in June this year, laying off about 400 workers in the process.

African copper is already indebted to the amount of $100 million (P950 million) to its London Stock Exchange parent company, ZCI limited.

This week, ZCI announced that they have pumped another $4.5 million (P43 million) into the Botswana operation for additional working capital and offsetting cash flow shortfalls caused primarily by lower-than-planned production levels at the Thakadu mine.

In a statement released on Wednesday, the company said that based on international forecasts, the loan facility would provide the group with sufficient cash resources to continue operations for around six months while it reviews its long-term operational strategy.

“Should the group not secure additional funds, and if current market conditions prevail, the board believes the company may not then be able to continue as a going concern,” the company warned.

The company added that in light of the existing market conditions and, more specifically, the recent fall in the copper price, it was conducting a review of its operations to consider various short- and long-term strategies to meet the group’s current and future funding requirements.

“As part of this ongoing review, the board is implementing efficiency and cost-optimisation measures to improve its liquidity position and has taken the decision to suspend waste stripping activities at the Mowana mine, with a strategy in the short term to focus on the remaining extraction of ore from the Thakadu mine,” read the statement. African Copper advised that it was “taking steps” to secure additional long-term funding for the new life-of-mine plan, with an expectation to resume waste stripping at Mowana and increasing the level of ore throughput to the plant.

Due to weak demand, copper prices are at their lowest since 2008 after dropping by $1,000 per tonne, or 15 percent in 2014 alone. Ratings agency, Moody’s in January this year changed its outlook for the global base-metals industry to negative from stable on the back of global economic weakness and falling copper prices.

African Copper’s latest financial results show that the Botswana Stock Exchange (BSE) listed, recorded a loss of $8.8 million (P83 million) for the six-month period ended 30 September 2014, compared with a loss of $29.1 million for the corresponding period in 2013.

Acting managing director Jordan Soko said the operating income from mining operations stood at $4 million, a decrease of 39 percent from $6.5 million for the corresponding period last year, driven primarily by increased mining and transport activities at Thakadu, in an effort to make good on previous shortfalls in mining and drilling activity.

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