Discovery secures P1bn for underground mine

The future of the Boseto project lies in the mining going underground
The future of the Boseto project lies in the mining going underground

Discovery Metals Limited (DML) has secured a $110-million (P1.05 billion) investment from equity fund, Castlepines Global Equities to develop the Zeta underground mine at the Boseto copper project, near Maun, and to pay its debts.

In a statement released to the Botswana Stock Exchange (BSE) yesterday, DML said it had signed a binding MOU that would culminate in Castlepines investing $110-million in Discovery’s wholly owned subsidiary Discovery Copper, which owns the Boseto project.

In return, Castlepines would receive a 34 percent interest ownership in Discovery Copper.

Discovery’s 66 percent remaining ownership in Discovery Copper would be pledged as security to Castlepines during the 12-year term of the investment.  The Castlepines investment comes after DML recently revealed that negotiations with Cupric Canyon Capital regarding the possible sale of Boseto mine had collapsed. “It is very pleasing for Discovery to have been able to attract an investor of the caliber of Castlepines, to assist us with our plans to enable the development of our planned underground mining and operations at Boseto,” said Discovery Managing Director Bob Faulker.


He noted that the Zeta underground mine had been a key strategic component of the Boseto development plan since its inception in August 2010.

“This was reaffirmed during our life-of-mine planning that was completed in early 2014. The future of the Boseto operation, and the entire mineral district, lies in the development of underground mining.”

The Boseto open pit mine is expected to be mothballed in the next six months, after a review of the open pit operations determined that the prevailing high strip ratio would result in a high operating cost environment, which was not sufficiently cash flow positive in light of the prevailing copper price.

It was not clear however, if the new funding would save any of the 380 jobs set to be axed as the open pit mine goes under care and maintenance in the next few months.

The MoU with Castlepines is subject to a number of conditions, including a due diligence study, the implementation of risk management strategies, as well as government and board approval by both companies.

“The future of the Boseto operation lies in the development of underground mining. We envisage having a minimum of three distinct mines with potentially five declines within the Boseto mineral,” said Faulker.

The mines would have the potential to bring copper production to a sustainable 30,000 tonne per year, for a 15-year mine life or more.

Late last year, DML announced that it believed that it was still viable to establish the Zeta underground mine, even though the costs of undertaking have increased.

A review of the project’s viability has revealed that not only have costs gone up, but its return along with its ore recovery will also take a knock.

A 2012 definitive feasibility study (DFS) estimated that the project would require a capital investment of $26.8-million (P235.9 million) to first ore production and would operate at a cash cost of $1.82 per pound. The 2012 DFS was based on a 1.5-million-tonne-a-year operation, with the Zeta mine expected to deliver 18,000 tonnes per year of copper and 800,000 ounces per year of silver, over an 11-year mine life. The revised DFS has slightly downgraded production to about 16,600 tonnes per year of copper and 720,000 ounces per year of silver, over an 11-year mine life.

The revision of the original DFS included changes to the sequence of the mine development, deepening of the Zeta open pit mine, developing portals for underground access from within the established open pit mine, and accessing upper production levels directly from the open pit area.

Since commissioning it in 2012, the company has been plagued by operational and financial challenges as low copper prices coupled with low ore grade recovery pulled the company finances into the red.  Two attempts to recapitalise the company in the past two years have also fallen through, throwing DML further into debt.

Editor's Comment
What about employees in private sector?

How can this be achieved when there already is little care about the working conditions of those within the private sector employ?For a long time, private sector employees have been neglected by their employers, not because they cannot do better to care for them, but because they take advantage of government's laxity when it comes to protecting and advocating for public sector employees, giving the cue to employers within the private sector...

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