Investor pulls out Boseto Mine deal
Pauline Dikuelo | Thursday February 5, 2015 11:37
This is the third time talks to find a buyer for the cash strapped mine have collapsed after Singaporean firm Blumont, Chinese company, Cathay, pulled out of acquisition talks in 2013 and 2014 respectively.
According to the company statement, DML has announced that that they have started to re-engage with a number of parties who are interested in funding the Boseto Copper Mine, as the exclusive period they had entered into with Cupric has expired.
Discovery reported that in the last 24 hours, a group seeking to finalise a term-sheet agreement within the coming days had approached the company. According to Discovery, this would likely allow for the settlement of all existing debt facilities and provide the required capital to allow Discovery to expedite the progression of the Zeta underground mine development, as well as working capital. The development of the Zeta underground mine was deferred in September last year after the company failed to raise the necessary funding for the project.
The Boseto mine is expected to be mothballed by June this year, 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.
The company announced in December that it would implement cost management and reduction strategies in order to reduce the operating costs at Boseto. “During the last 24 hours, DML has also been approached by another interested group who is seeking to finalise a Terms Sheet Agreement with DML over the coming days,” reads the statement. This includes the provision of short-term working capital funding being made available to DML.
In recent months, DML has continued with internal works on optimising the 2014 Feasibility Study for the Zeta underground development. “DML remains firmly committed to unlocking value from its extensive Mineral Resources through the commencement of the Zeta underground development. Accordingly DML continue to consider and persue options which allow for this project to be funded and progress in the near term.”
Riddled by numerous challenges since commissioning in 2013, Boseto has been experiencing financial strains characterised by high debt, coupled with the collapse of few recapitalisation deals. Low ore grades recovered at Boseto have also exacerbated the company’s difficulties.
Production at troubled Boseto Copper Mine fell by 13 percent in the last three months of 2014, as the mine continues to struggle, ahead of its closure in June this year. Last year DML said they would retrench about 380 Boseto workers, which represents 90 percent of the Boseto workforce this year, before suspending mining and processing operations in July due to high mining costs set against softening copper prices.