JOHANNESBURG (miningweekly.com) – Cash-strapped copper producer African Copper has signed a further secured loan facility of $4.5-million with its controlling shareholder ZCI Limited (ZCI).

The loan would provide the London-listed company with additional working capital in the “difficult” prevailing market conditions and offset cash flow shortfalls caused primarily by lower-than-planned production levels at the Thakadu mine, in Botswana.

The company said in a statement on Wednesday that, based on international forecasts, the loan facility would provide the group with sufficient cash resources to continue operations for around six months while it reviews its long-term operational strategy.

“Should the group not secure additional funds, and if current market conditions prevail, the board believes the company may not then be able to continue as a going concern,” it cautioned.

The company added that, in light of the existing market conditions and, more specifically, the recent fall in the copper price, it was conducting a review of its operations to consider various short- and long-term strategies to meet the group's current and future funding requirements.

“As part of this ongoing review, the board is implementing efficiency and cost-optimisation measures to improve its liquidity position and has taken the decision to suspend waste stripping activities at the Mowana openpit [mine], [in Botswana], with a strategy in the short term to focus on the remaining extraction of ore from the Thakadu mine,” it revealed.

African Copper intended to mine ore at the Mowana openpit that was substantially exposed from recent waste stripping activities, which would allow for copper production beyond July – the current estimated date at which the reserves at Thakadu were estimated to be depleted. 

The group believed the suspension of waste stripping provided “the highest prospects of getting through the current difficult market conditions” and  provided a limited window of opportunity for restructuring the business for long-term sustainability.

African Copper advised that it was “taking steps” to secure additional long-term funding for the new life-of-mine plan, with an expectation to resume waste stripping at Mowana and increasing the level of ore throughput to the plant.

ZCI LOAN
The ZCI loan facility was secured at an interest rate of 9% a year, with the principal and accrued interest repayable in instalments from April 30 and repaid in full by July 31. 

As announced in the company's interim results in December, ZCI agreed to defer all principal and interest payments arising from African Copper debt obligations until December and confirmed to the company that it would continue to make sufficient financial resources available, up to a maximum of $7-million, to allow it to continue meeting its liabilities.

As part of this ZCI financial support, African Copper had received additional financing from ZCI in December in the form of a term facility with a principal value of $2.5-million.

The most recent $4.5-million facility, together with the $2.5-million term facility announced in December, equated to the $7-million maximum amount available for drawdown by African Copper from ZCI. 

As at  December 31, the group owed ZCI some $100.5-million