Discovery chops 85 jobs at Boseto
Brian Benza | Thursday January 16, 2014 17:02
DML country manager, Mokwena Morulane told Mmegi Business this week that management has approved the exercise designed to improve the cost competitiveness of the mine and enhance production efficiencies. The restructuring would see the retrenchment of 85 of the 516 employees at Boseto, though this is not expected to have a material effect on the production.
Saddled with a $153 million (P1.3 billion) debt, the mining company is going through a financial strain largely stemming from the collapse of the $100 million (P870 million) recapitalisation deal from Singaporean firm, Blumont.
Low international copper prices coupled with low ore grades recovered at Boseto has also exacerbated the company's difficulties. Morulane said since commissioning in June 2012, the project has faced numerous challenges. 'We have been able to produce the quantities initially planned and the recent suspension of the recapitalisation deal has worsened our financial position. The company came up with a plan to bring down costs to a level where we are able to sustain operations and this included cutting down labour costs. Following extensive discussions with key stakeholders, including unions, employees and government representatives, we have decided to cut down our workforce by 15%,' he said.
In the year up to June 2013, the company reported a loss of $224 million (P1.95 billion) after booking a $206 million write down on the Boseto project. The retrenchment exercise started on Tuesday with affected workers undertaking exit medical check-ups and counselling. The company has also cut down staff at its Gaborone and Brisbane offices.
The Boseto mine's production fell by 6.5 percent quarter-on-quarter during the three months to September to 4,705 tonnes.
Currently the company produces 1,500 tonnes of copper from the initial target of 3,000 tonnes established in the Bankable Feasibility Study (BFS).
Copper prices have slumped to about $3.20 per pound from about $4.30 at the time the BFS was compiled.
According to Morulane, the absence of infrastructure to connect to the national power grid has also contributed to high costs as the mine is currently being solely powered by diesel generators.
Plans to establish a coal-fired 20MW power station at the mine have been crippled by the prohibitive costs of about $60 million.
Looking forward, Morulane says that Discovery is still pursuing other investors who have expressed interest in either injecting debt financing or taking up equity in Botswana's largest copper mine. The company obligations include quarterly loan repayments of about $19 million while cash is also needed to pursue underground mine development which is expected to lead to the recovery of better ore grades.
Meanwhile, in a statement released yesterday to the Australian and Botswana bourses, Discovery announced that its lenders have granted further waiver such that a scheduled repayment date for a principal repayment of $17.5 million has been deferred until February 28, 2014. Another interest obligation amounting to $2.2 million, which was due on December 31, 2013 has been deferred to February 15, 2014.