Tuesday, March 24, 2009

African Copper optimistic of good investment

Developers of the Mowana Mine, African Copper, are hopeful that the proposed terms of investment with Natasa Mining would be the best terms available to the company.

A press release from the company states that the severe reduction in demand and price, delays in shipping first concentrate due to delays in commissioning of the Mowana Mine and current market volatility and uncertainty, African Copper has been unable to achieve or obtain the anticipated cash flow required to finance its working capital requirements for continued operations.

"This situation, coupled with the unfolding global financial crisis, has resulted in extreme difficulties regarding the availability and terms of possible financing proposals," reads the press release.

Under the proposed agreement, Natasa, an investment company in the mining industry, has agreed to make available, a short-term, interest free, secured loan of US$1.5 million, which would be repaid out of the proposed US$6.5 million private placement of ordinary shares and funds advanced to the company pursuant to a proposed US$8.5 million debt facility.

The release says the condition of the bridge loan is that Natasa appoints two senior managers to African Copper's subsidiary company, Messina Copper Botswana, to oversee the application of the proceeds of the loan.

Under equity placement, Natasa has agreed to subscribe for 1 581 557 998 ordinary shares in African Copper to provide aggregate gross proceeds of US$6.5 million, hence Natasa will hold 70 per cent of the enlarged ordinary shares of African Copper.

The equity placement will be subject to conditions such as approval by African Copper shareholders, agreement of legal documentation for debt facility and the delisting of African Copper from Tokyo Stock Exchange.

The release says another condition is the compromise of debts such that African Copper and its subsidiaries' liabilities will be extinguished in full leaving cash balance of at least US$3 million for working capital purposes.

The release further says that all the directors and officers of African Copper are also required to resign and be replaced by nominees of Natasa who will be identified in African Copper's information circular to be sent to shareholders.

The US$8.5 million loan facility made available to Messina Copper will bear interest of 12 per cent per annum and provide capital and interest repayment from cash generated by Mowana Mine.

Under the Debt for Equity Agreement, African Copper will pay to the creditors, US$5.9 million, 20 per cent of the amount owed to them and will be funded from the proceeds of the Debt Facility and the Equity Placement.