Cupric seeks P3.5bn to build new copper mine


Mining company, Khoemacau says it will approach the markets to raise up to $350 million (P3.55 billion) needed to bring its new copper and silver mine at Somelo in the northwest region to production.

The construction of the mine is set to start in late 2016 with the first copper shipment to the markets expected in 2018.

In an interview with BusinessWeek, Cupric Canyon Africa Chief Executive Officer, Sam Rasmussen said the mine will produce 50,000 tonnes of copper and 1.5 million ounces of silver per annum. Cupric Canyon Africa is the parent company to Khoemacau.

 “We will approach the markets before the end of the year to seek the start up capital for the development of the mine.

It can be investment through equity or otherwise.  We do not have a preferred financing option yet, it will all depend on the response from the market,” he said.

Cupric has mandated international finance house, Citibank to deal with the sell side mandate of the cash raising transaction.

Initially expected to cost about $200 million, the development of the new copper mine will be based on a new feasibility study, which has proved a largest copper and silver resource at the mine.

Khoemacau is expected to utilise the processing plant at the nearby Boseto Mine, which it acquired following the liquidation of Discovery Metals.

In May, Khoemacau concluded a $35 million deal through an offer of compromise to buy the mothballed Boseto Mine, which is only 30 kilometres away from the Somelo site.

Both the new mine at Somelo and Boseto, when reopened in 2018, are expected to employ 800 workers at full production.  The company is also in negotiations with government over the connection of the northwestern region to the national grid.

The region, which hosts the copper rich Kalahari Copperbelt, is currently not connected to the power grid and government is installing transmission lines to the area. Government also has an option to acquire a 15% stake in Khoemacau and according to Rasmussen, the state has not made a decision yet on the shareholding.

In a recent interview with BusinessWeek, Khoemacau regional manager, Johannes Tsimako said government was still awaiting recommendation from a consultancy firm. “Government has engaged AFI Corporate Advisors to do due diligence of the deal and we expect it to take up to two months. The 15% option is only confined to the Zone V mining project near Somelo, which has six prospecting licences,” Tsimako said.

AFI is a South African financial advisory firm focusing on Project Finance, Mergers and Acquisitions, Capital Raising and Corporate Restructuring.

According to the Mines Act, once a mining licence has been issued the government has the option of acquiring up to 15% working interest participation in the proposed mine, including the right to appoint up to two directors.

If the option is exercised, the government pays for its shareholding by contributing its working interest percentage of all audited expenditure incurred by the company.

If the government chooses not to exercise the option at the mine development phase, the option lapses.

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