Discovery Metals Limited could sell Boseto Copper Operation to Cupric Canyon Capital LP after the copper miner entered into a US$5 million short term working capital facility with the financier.
The troubled Australian company has been having tough time with lenders and the facility will be used to provide support to DML’s current operations arising from operating cash-flow shortfalls in November 2014, and for working capital purposes.
According to the Botswana Stock Exchange (BSE) listed company, one condition to the facility agreement grants Cupric a period of exclusivity to allow it to complete due diligence and to allow time for both DML and Cupric to finalise and agree definitive terms of the potential transaction.
“The exclusivity period extends until the earlier of the execution of a legally binding sale and purchase agreement with Cupric, and 31 January 2015 (or such other date as may reasonably be agreed between DML and Cupric). The Facility has a final termination date of 31 August 2015,” Discovery Metals said.
“DML will be required to seek approval from its shareholders (via an Extra-Ordinary General Meeting) prior to any transaction with Cupric being finalised,” it added.
The facility includes US$3 million in immediately available funds, a further US$2 million available from 31 January 2015 with interest payable on a monthly basis at LIBOR plus a margin of 10.0 percent per annum.
According to DML, its Project Finance Lenders are supportive of both the potential Transaction and the Facility agreement.
Earlier this year, the company announced it was retrenching workers at the Boseto mine that affected only 85 employees based at the Boseto Operation out of a total staff complement of 516 protecting the on-going jobs of 85 percent of our workforce.
The junior miner reasoned that was cutting jobs at the flagship project in a bid to cut costs and offset the impact of lower copper prices saying labour was the second significant cost to the company after diesel as company generates its own energy at the flagship project.
“After long and careful deliberations, the company has concluded that for the benefit of the majority of employees and the ongoing security of the entire Boseto Operation, the retrenchment of a proportion of our employees at the Boseto Mine is required,” Discovery’s Country Manager Botswana, Mokwena Morulane said at the time.
“The company recognises that this is a difficult time for all employees and has endeavoured to provide support to retrenched staff in the form of a financial package, and has made available a professional counselling service, the cost of which will be borne by the Company,” he said.
Cupric Canyon Capital was established in 2010 to acquire undeveloped copper assets with a known resource, add value by taking the projects through the development process, and ultimately exit via a sale or IPO.
The private equity company is backed by the investment banking division of Barclays Bank PLC through its Barclays Natural Resource Investments team.
Cupric owns a collection of copper assets in northeastern Namibia and northwestern Botswana including the Khoemacau copper-silver project in the center of the Kalahari Copper Belt through its acquisition of Hana Mining Ltd. in February 2013.