African Copper, the copper production and exploration-company focused on Botswana, said this week it has secured an additional loan of US $6 million from its controlling shareholder ZCI Limited (ZCI).
In an update, the BSE-listed company said the purpose of the new loan is to provide the company with further working capital for its Mowana Mine facilities, partially to cover the funding gap caused by the failure of the Ball Mill pinion shaft in May 2012.
“This has impacted working capital since normal payables were incurred in May 2012 but revenues were significantly reduced,” the company said.
“The Mowana plant resumed operations on 5 June 2012 after the successful replacement of the pinion shaft, mill gearbox and liners,” it added.
African Copper said daily production is progressively increasing and management is looking to exceed the record production level of 809 Mt of copper in concentrate that was realized in March 2012.
The new USD6.0 million convertible loan from ZCI is a secured loan facility with a simple interest rate of 7 per cent, repayable on 31 March 2014.
Interest will be accrued annually and interest payments deferred until 31 March 2014. The Facility is convertible into ordinary shares of 1p each in ACU at a conversion price of 2.40p per share equivalent to the 60 day volume weighted average closing share price of ACU on the AIM Market of the London Stock Exchange.
The maximum aggregate number of new ordinary shares, which may be issued pursuant to the conversion rights attaching to the facility is 163,036,390 new ordinary shares, which would, were the Facility to be converted in full, increase ZCI’s interest in the enlarged issued share capital of the Company from 84.19 per cent. to 91.09 percent assuming the existing ZCI USD8.4 million convertible loan facility was also converted.
The terms and conditions of the Facility are on substantially similar terms to the previous term loans from ZCI and bring ACU’s total interest-bearing loans (including accrued interest at 31 March 2012) from ZCI to USD71.78 million, excluding the existing convertible loan of USD8.4 million and the Facility of USD6.0 million.
As ZCI owns 84.19 per cent of ACU’s total issued ordinary share capital at the date of this announcement and is providing financing to the company, the facility falls within the definition of a related party transaction under Rule 13 of the AIM Rules for Companies.
The independent directors of the Company consider, having consulted with its nominated adviser Canaccord Genuity Limited, that the terms of the transaction are fair and reasonable insofar as its shareholders are concerned.
ZCI has invested large sums of money into African Copper and the company said last week it is reviewing its investment in the developers of the Mowana mine.
“Shareholders are advised that the process is ongoing and may have a material effect on the price of the Company’s securities. Accordingly, shareholders are advised to continue exercising caution when dealing in the Company’s securities until a further announcement is made,” African Copper said.