Alecto Minerals to buy Botswana copper mine
Gold miner Alecto Minerals is to buy Cradle Arc Investments, which holds a 60% stake in the Mowana copper mine in Botswana for about £6.72m.
The AIM-listed company will pay £1m in cash and the rest with the issue of 8.79m shares of 0.01p at 0.065p each, that will represent 60% of the issued share capital of Alecto, which in total amounts to about £6.72m.
The proposed acquisition is considered a reverse takeover and so the company’s shares will be suspended on AIM from Wednesday until the deal is approved by shareholders.
The company said the acquition will be “transformational” as the Mowana copper mine and plant will be able to be brought back into production at “a relatively low cost”.
The mine was commissioned in 2008 a for $60m and until 2015 it processed an average of 775,406 tonnes per year of ore at an average grade of 1.72% copper. In 2013/14 Mowana produced 43,301 tonnes of concentrate, representing 9,724 tonnes of copper.
Mowana has a mineral resource inventory of 683,000 tonnes of copper in the measured and indicated categories with an additional 945,000 tonnes in the inferred category.
Alecto and its partners in the proposed acquisition have re-modelled the mine so it can produce from a much lower cost base to generate profit even at depressed commodity prices. At a copper price of $2.50 per pound, Alecto's internal estimate for the project's net present value is $245m.
The company agreed to a 10-year management contract for Mowana with its partners and will receive management fees equal to 1.5% of revenue.
An offtake financing agreement has been agreed with Cradle for $20m which will provide funding for investment in the mine and the plant.
Chief executive Mark Jones, said: "I very much look forward to effectively completing our transformation from a greenfield exploration company into a multi-commodity metals producer in Africa in the coming months, and the team has conducted significant work to ensure that this is achievable. Our technical team has worked tirelessly to generate a robust business model that will target early cash flow from both the profitable mining of copper and the management of the operation."
Botswanan copper development company Leboam Mowana’s assets from Messina Copper Botswana through a liquidation process which was confirmed following a court approved arrangement with MCB's creditors on on 16 December. MCB was previously controlled by African Copper plc, prior to its takeover by ZCI.
Under the terms of the Leboam acquisition a $20m payment is due to the liquidators in May 2017 to settle the MCB creditors' claims. Leboam has also agreed to take over $112m of existing debt owed by MCB to ZCI, which was the major creditor to MCB and holds security over the assets of Mowana.
ZCI has agreed that on payment of the $20m it will release its security in its entirety, convert $79m of its outstanding debt into 40% of equity in Leboam, and leave the remaining $21m as a term loan repayable over 10 years. Following the Leboam payment, Alecto's interest in the mine will be 60%.