Alecto Minerals Plc on Dec. 21 announced plans to acquire the Mowana copper mine, which is on care and maintenance in northeastern Botswana, by acquiring Botswana-based Cradle Arc Investments Pty. Ltd. for about £6.7 million.
For the acquisition, the London-listed company will pay £1 million in cash and issue shares equal to 60% of its share capital, estimated at 8,793,869,932 shares, to the vendors and nominees.
Alecto is in talks to secure additional funding for the deal, as well as to resume production at Mowana and for working capital. The company will not proceed with the acquisition if it fails to raise the required funds.
Cradle is a holding company that owns the Mowana property via a subsidiary of Leboam Holdings Pty. Ltd., which acquired the assets from Messina Copper Botswana Pty. Ltd. through a liquidation process. Messina was acquired by Johannesburg-listed ZCI Ltd. from African Copper Plc.
Under the terms of the Leboam acquisition, US$20 million must be paid to the liquidators in May 2017, and Leboam will take over US$112 million in existing debt owed by Messina to ZCI. ZCI plans to convert US$79 million of this debt into a 40% equity stake in Leboam while leaving the remaining US$21 million as a term loan to be repaid in 10 years.
Following the payment, Alecto's stake in the mine will be 60%.
At a copper price of US$2.50 per pound, Alecto estimates the property's net present value will be US$245 million, at a 10% discount rate, with an internal rate of return of 55%. The mine is expected to produce 22,000 tonnes of copper per year with an average 1.34% copper grade over an 11-year mine life.
The mine hosts JORC-compliant resources of 683,000 tonnes of copper in the measured and indicated categories with 945,000 tonnes in the inferred category.
Alecto also reported that it agreed to a 10-year management contract for Mowana with its partners and will receive fees equal to 1.5% of the revenue.
In addition, the company secured a US$20 million copper off-take agreement with Fujax Minerals and Energy Ltd. and Northern Heavy Industries Group Co. Ltd. to upgrade the mine and plant to increase recoveries. Fujax also agreed to provide the US$20 million owned to Messina liquidators.
Alecto plans to upgrade the plant to increase throughput to 2.6 million tonnes per annum from 1.2 Mtpa.