Discovery shuts Boseto Mine, axes 380 jobs
Brian Benza | Thursday December 18, 2014 11:53
The troubled 15,000-tonnes-per-year copper mine, which cut 85 jobs early this year in a restructuring exercise, will be placed on “care and maintenance” within the next six months.
In an interview with Mmegi Business, Discovery Metals Botswana country manager Mokwena Morulane said an internal review over the economic feasibility of Boseto pointed to a soft market outlook for copper, where the price of the metal has dropped by $1,000 per tonne, or 15 percent, since January.
“The review has determined that the prevailing high strip ratio open pits result in a high cost operating environment which is not sufficiently cash-flow positive in light of the prevailing copper price.
“The review concluded that the current outlook for copper pricing on world commodity markets is expected to remain soft in the short to medium term and hence a recovery in the profitability of the Boseto open pit operations is unlikely in the near future,” he said.
According to Morulane, retrenchment of the 380 workers, which represents 90 percent of the workforce, will be conducting between April and June next year, before the mining operation are mothballed by the middle of the year. “We currently have approximately 422 employees. These will receive full benefits until retrenchments are effected, anticipated to start from April to July 2015. During the care and maintenance period, currently anticipated to be from June 2015, we expect to retain approximately 42 employees, who will mostly be maintenance and some security personnel,” said Morulane.
Riddled by numerous challenges since commissioning in 20123, Boseto has been experiencing financial strain characterised by high debt coupled with the collapse of a few recapitalisation deals. Low ore grades recovered at Boseto has also exacerbated the company’s difficulties.
In June, Discovery reported that its cash operating costs were averaging $2.86 per pound.
Benchmark London Metal Exchange copper closed at $6,362 per tonne, or $2.88 a pound on Tuesday.
A worldwide copper supply surplus of 300,000 tonnes has been forecast for 2015 by Australia’s Bureau of Resource and Energy Economics. “The objective of this mode of operation, which is to be implemented immediately, is to maximise all available revenues and cash generation available from the Boseto copper operation, and to minimise all expenditure outlays across all areas of the company’s current expenditure.”
“The operational review indicates that at the end of this period, sufficient revenues and cash funding is expected to have been generated to repay all short term lending, to fund all creditor and employee obligations, and to sustain the operations on a ‘care and maintenance’ basis, while alternative options were able to be assessed for the Boseto Copper Operation,” read a statement from the Australian Stock Exchange listed company.
Moreland would not commit to an envisaged date for the Mine’s reopening, saying it would be determined ‘by an improvement in economics essentially, an improvement in the copper price’.
Discovery CEO Bob Fulker recently said the future of Boseto lies in the mine going underground, despite a recent review of a feasibility study, which cut down the project’s ore recovery while costs are envisaged to go up.
The open pit Boseto Mine was to soon go underground at Zeta pit, as Discovery Metals Limited (DML) looked to boost ore production and grade at the mine.