Lifeline for Boseto Mine workers
Brian Benza | Thursday February 12, 2015 12:00
The Australian company is due to close its ‘unprofitable’ open pit operations in the first half of this year with only 42 of the 422 workers earmarked to retain their jobs under the care and maintenance period.
Discovery Metals Botswana country manager, Mokwena Morulane told Mmegi Business that plans to close the Boseto open pit mine will go ahead, although the new funding might help mitigate the pending job losses.
“The company still views the open pits as unprofitable given the high strip ratios and current world copper prices. The shutting down of unprofitable open pits will continue as scheduled in a structured manner,” Morulane said.
“There will be some unavoidable loss of jobs. However, the development of the underground mines will somewhat mitigate the impact on loss of jobs and when the underground mines are fully developed there will be an opportunity to re-hire”.
DML announced on Monday this week that it had 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.
Under the new deal, Castlepines would invest $110 million in Discovery’s wholly owned subsidiary Discovery Copper Botswana (DCB), which owns the Boseto project. In return, Castlepines would receive a 34 percent interest ownership in DCB. Discovery’s 66 percent remaining ownership in Discovery Copper would be pledged as security to Castlepines during the 12-year term of the investment. Morulane however pointed out that the Castlepines investment is not a done deal yet as certain conditions are still to be met. “We are enthused by the binding MOU signed with Castlepines, an international equity investment fund,” he said.
“However, the deal is still subject to conditions precedent such as Castlepines undertaking satisfactory due diligence, and completion and agreement of long form documentation to facilitate the investment, amongst others”.
Apart from funding the development of the Zeta underground mine, part of the new new investment will be used to pay out the existing $5 million with loan finance facility with Cupric Canyon Capital as well as settle existing loan finance facility with DML’s secured lending syndicate.
Since commissioning in 2012, the mine has been weighed down by operational and financial challenges as low copper prices coupled with low ore grade recovery pulled its finances into the red. Three attempts to recapitalise the company in the past two years have also fallen through, throwing DML further into debt. However, the Discovery official now believes the future of the Boseto copper project lies in Zeta mine going underground. The expected average production from the Zeta underground mine is 1.5mtpa over 11 years.
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. A 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.