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Proposed Acquisition of the Mowana Copper Mine, Botswana

Publié le 21 décembre 2016

Alecto Minerals plc / EPIC: ALO / Market: AIM / Sector: Mining 21 December 2016

Alecto Minerals plc ("Alecto" or the "Company") Proposed Acquisition of the Mowana Copper Mine, Botswana

Suspension of trading in shares on AIM Board changes

Alecto Minerals plc (AIM: ALO), the Africa-focused gold and base metal exploration and development company, is delighted to announce the proposed acquisition of Cradle Arc Investments (Proprietary) Limited ("Cradle"), a company incorporated in Botswana, which owns the Mowana Copper Mine ("Mowana" or the "Mine") in north eastern Botswana (the "Proposed Transaction").

The Proposed Transaction constitutes a reverse takeover under the AIM Rules for Companies (the "AIM Rules"); accordingly, trading in the Company's ordinary shares on AIM will be suspended with effect from 7.30 a.m. today and will remain suspended until an admission document is published in accordance with the AIM Rules, and the Proposed Transaction is subject, inter alia, to shareholder approval.

Highlights

  • Proposed Transaction will be transformational - Alecto will acquire a 60% interest in Mowana, a former producing copper mine, and plant which can be brought back into production at a relatively low cost

  • An offtake financing agreement has been agreed by Cradle for US$20 million which will provide funding for investment in the mine and the plant in order to increase recoveries

  • Mowana has a mineral resource inventory of 683,000 tonnes copper ("Cu") in the Measured and Indicated categories (JORC-code compliant) with an additional 945,000 tonnes Cu in the Inferred category

  • The Mine was commissioned in 2008 at a cost of US$60 million. It operated successfully between 2008-2015 processing an average of 775,406 tonnes per annum ("tpa") of ore at an average grade of 1.72% copper. In FY13/14 Mowana produced 43,301 tonnes of concentrate, representing 9,724 tonnes of Cu

  • Alecto and its partners in the Proposed Transaction have re-modelled the Mine to ensure that it can produce from a much lower cost base to generate profit even at

    depressed commodity prices. At a copper price of US$2.50 per lb, Alecto's internal

    estimate for the project's NPV is US$245 million

  • Alecto intends to perform process route upgrades including the installation of a Dense Media Separation ("DMS") plant to increase throughput from 1.2 million tpa to 2.6 million tpa to achieve an average copper production of 22,000 tonnes saleable Cu per annum

  • The process route upgrades, which are expected to cost US$20 million, will be funded through an agreement with Fujax Minerals and Energy Limited ("Fujax") and Northern Heavy Industries Group Company Limited ("NHI")

  • Alecto has agreed a 10-year management contract for Mowana with its partners and will receive management fees equal to 1.5% of revenue

  • Mowana key data and assumptions:

    Life of Mine (LOM)

    11 years (from known resources with exploration

    upside potential)

    Annual Production

    22,000 tonnes of Cu

    Average Copper Grade

    1.34% Cu

    Average Silver Grade

    30 g/t

    Average Gold Grade

    0.5 g/t

    NPV (10%)

    US$245 million

    IRR

    55%

    Source: Leboam Mowana Financial Model dated 20 December 2016

  • Alecto will require additional funding in order to proceed with the Proposed Transaction and in order to provide funding to Mowana for the recommencement of production and it is in discussions with potential providers of such working capital financing

    Mark Jones, CEO of Alecto Minerals, commented:

    "Mowana is a first class copper mining project and I am very excited about the prospect of bringing it into Alecto's portfolio. The proposed acquisition of Mowana will be transformational for Alecto, turning the Group in to a producing miner and materially strengthening its balance sheet.

    "I very much look forward to effectively completing our transformation from a greenfield exploration company into a multi-commodity metals producer in Africa in the coming months, and the team has conducted significant work to ensure that this is achievable. Our technical team has worked tirelessly to generate a robust business model that will target early cash flow from both the profitable mining of copper and the management of the operation. Additionally,

    our commercial team has secured commitments for funding, so that we can realise the maximum value from copper production and quickly initiate plant improvements at Mowana that are expected to deliver substantial production efficiencies.

    "The proposed Mowana acquisition represents an ideal opportunity to achieve a complete transformation of Alecto and we look forward to keeping investors abreast of our progress."

    The Proposed Transaction

    Alecto has agreed conditionally to acquire 100% of the issued share capital of Cradle for a consideration of £1,000,000 payable in cash (the "Cash Consideration") and the issue of new ordinary shares of 0.01 pence each ("Ordinary Shares") to the Vendor and its Nominees (as defined below) (the "Consideration Shares") that will represent 60% of the issued share capital of Alecto, as enlarged by the Proposed Transaction (including any associated equity fundraising) and any other share issues prior to completion. The final number of Consideration Shares will therefore be determined by, inter alia, the scale of any equity fundraising undertaken by Alecto prior to or in conjunction with the Proposed Transaction. However, as at the date of this announcement, the number of Consideration Shares to be issued is estimated to be 8,793,869,932. Accordingly, at 0.065 pence (being yesterday's closing price per Alecto share), the aggregate consideration to be paid by Alecto is therefore currently estimated to be approximately £6.72m.

    The Proposed Transaction would constitute a reverse takeover under the AIM Rules due to its size and nature and will be subject to, inter alia, the publication of an admission document in respect of the enlarged group in accordance with the AIM Rules and shareholder approval.

    Furthermore, the AIM Rules require that where a company announces a reverse takeover, trading in its shares on AIM be suspended pending publication of an admission document. Accordingly, trading in Alecto's shares will be suspended from 7.30 a.m. today until an admission document setting out full information on the Proposed Transaction and the enlarged group can be published. It is currently anticipated that an admission document will be published by the end of March 2017.

    PenMin and Alecto have conducted considerable technical due diligence over a period of several months, as a result of which the Directors believe that the Proposed Transaction represents an attractive proposition for Alecto and its shareholders. However, the Proposed Transaction remains subject, inter alia, to formal legal, financial and technical due diligence, and to both financing and shareholder and regulatory approval and there can be no certainty as to when and if the Proposed Transaction will complete.

    Alecto will require additional funding in order to proceed with the Proposed Transaction and to provide funding to Mowana for the recommencement of production and is in discussions with potential providers of such working capital financing, further details of which are set out below. If such funding cannot be raised, Alecto will not be able to proceed with the Proposed Transaction and will not be able to fund the recommencement of production at Mowana.

    Cradle Arc Investments (Pty) Limited

    Cradle is a holding company which currently owns 100% of the Mowana copper mine and plant in Botswana through its wholly owned subsidiary, Leboam Holdings (Pty) Limited ("Leboam").

    The Mine consists of an open pit operation and a process plant, located within a PaleoProterozoic sedimentary basin of the southern African Shield, in north-east Botswana, that uses standard flotation process technology and has been designed to produce saleable copper concentrates from the treatment of up to 1.2Mtpa of oxide, supergene and sulphide ores. The process plant has two flotation circuits. Minerals are separated first, and tailings from the roughers are sent to an oxide circuit. Most other mineral species are recovered in the oxide flotation process. Concentrates are filtered to recover excess process water. Tailings are dewatered using thickeners and deposited onto a tailings storage facility. Water recovered in the dewatering stages is recycled to the various parts of the plant as appropriate. The plant is in good condition and capable of re-commencing mining using the existing infrastructure.

    The plant consists of:

  • a conventional crushing and screening circuit consisting of a primary crusher (fed from the ROM pad), and a secondary and tertiary crushers presenting a 15mm feed size to the mill;

  • a single 150tph ball mill;

  • a conventional dual oxide/sulphide flotation circuit;

  • a concentrate drying circuit, including a Larox filter;

  • a concentrate bagging station; and

  • tailings dewatering equipment.

Power is supplied via a 132kV overhead line from a switching station on the national grid, 19km west of the site.

A detailed scoping study has been completed by Minero Consulting and SENET (Pty) Ltd ("SENET"), a leading South African project management and engineering company, for the introduction of a new DMS pre-concentration process and upgraded crushing that will increase throughput to 2.6 million tonnes per annum.

Leboam purchased the assets that comprise Mowana from Messina Copper Botswana (Pty) Limited ("MCB") through a liquidation process which was confirmed following a court approved arrangement with MCB's creditors on 16 December 2016. MCB was previously controlled by African Copper plc (previously listed on AIM), prior to its takeover by JSE-listed, ZCI Limited ("ZCI") (JSE: ZCI).

Under the terms of the Leboam acquisition a US$20 million payment (the "Leboam Payment") is due to the liquidators in May 2017 to settle the MCB creditors' claims. Additionally, Leboam

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