Discovery Metals raises P200m cash

Brian Benza
Staff Writer | Friday May 31, 2013 00:00

The miner said this week that as of May 24, it had $37.3million in cash, which included $12.4 million of hedge closeout proceeds with the balance of $13.6 million expected by May 28.Some $22 million of the hedge closeout proceeds would be applied to loan repayments, with the balance to be transferred to the Debt Service Reserve Account.Project debt on the Boseto copper project has now been reduced to A$129-million, Discovery said, while total group interest bearing debt was at A$154-million.

'The company's remaining hedge book now comprised copper hedging from June to December of 8,521 t at a weighted average forward price of A$8,875, and a marked market value of around A$13-million,' said the company.The Botswana Stock Exchange (BSE) listed copper miner last week put itself up for sale after it failed to win the support of Chinese shareholder Cathay Fortune Corporation (CFC) for a plan to raise up to $245 million (P2.03 billion) in new debt and equity.

The decision was a fresh twist to the long running battle for the mining company, whose key asset is its wholly owned Boseto Copper project, located near Maun. In a statement released to the BSE and the Australian Stock Exchange, where the company has a primary listing, Discovery said it has opened its books to several bidders, including erstwhile suitor CFC.Two banks, UBS and Credit Suisse, are handling the bidding process.Discovery Metals said it had signed confidentiality agreements 'with a number of parties to date' and that it would be accepting binding proposals until June 10.

CFC, according to Discovery, has tabled a new proposal of   between 35 cents and 40 cents a share, which is significantly lower than the initial takeover offer of $1.70 a share offered last October in the first bid for the junior mining company.CFC currently owns 13.7 percent of Discovery Metals. Discovery resumed trading after a three-week suspension while the company tried to stitch together a refinancing, involving a $75 million equity raising - a $25 million share placement to a cornerstone investor and a $50 million accelerated non-renounceable issue to existing shareholders - and a $225 million high yield bond issue in the US.

Discovery Metals has prospecting licences covering 11,872 square kilometres along the Kalahari Copperbelt. In an effort to protect future revenues from commodity prices fluctuations, Discovery says as at 31 December 2012, the company had hedged approximately 47 percent of copper and 65 percent of silver providing downside price protection on a portion of the Boseto production.Approximately 53 percent of the copper production will be sold at spot market prices. The total hedged quantities are 37,521 tonnes of copper and 1,620,939 ounces of silver.Copper prices have weakened over the past six months, but the metal's use in everything from high-end electronics to plumbing means it is closely watched by traders as a barometer for the global economy.