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Metorex outlines its DRC copper plans
Allan Seccombe
Posted: Fri, 12 Dec 2008
[miningmx.com] -- METOREX, the majority shareholder of AIM-traded Copper Resources Company (CRC), has suspended work on the Kinsenda mine at which it has already spent $20m, and wants to delist CRC as it pushes hard to complete its key Ruashi project.
Metorex’s exposure to the Democratic Republic of Congo (DRC) has been a high-risk/high-return strategy and so far it’s proved to be a very difficult environment for the South Africa-based company to operate.
Costs have ballooned at its $320m Ruashi copper and cobalt project and the time line has been pushed back by some six months.
The chairman and two executive directors at Metorex, as well as CEO Charles Needham, have been pushed out by irate shareholders after the company unveiled a R922m fundraising exercise that includes a highly dilutive rights issue that crippled the share price.
Two of the directors, Keith
Spencer and Edward Legg will continue to act as advisors, and Needham will be bumped into a group managing director role once his replacement is found.
Of the R922m to be raised, R700m will go towards completing the Ruashi project in one of the more difficult – and uncertain -- operating environments in Africa.
Another important departure from Metorex’s board is George Forrest, one of the, if not the, most powerful businessmen in the DRC, who resigned as a non-executive director.
Forrest nominated Pierre Chevalier, a Belgian national with DRC business experience, to replace him. Chevalier is the executive vice president of George Forrest International, the DRC’s largest copper and cobalt mining group.
Mining and exploration permits owned by Metorex and about 60 other companies in the DRC are under review, a long drawn out process that has been a source of much anxiety for the companies and their investors.
“The current status of these discussions is that settlements acceptable to the Company (Metorex) appear to have been agreed,” it said in a statement, adding it could not give details until the agreements had been signed by the government which wants to release the results all at once rather than piecemeal.
The Ruashi project, which is now the primary focus of attention for Metorex management, will
produce 550 tonnes of copper cathode from its second phase development in November and build up to 80% of capacity by June and then on to full capacity of 45,000 tonnes at the end of 2009.
The cobalt plant is in commissioning phase, building up to 70% of design capacity by June and full production of 3,500 tonnes at the end of 2009.
Ruashi’s output will be hedged, with 8,025 tonnes sold forward at $7,071/tonne between now and June 2009.
From July to September 2010, Ruashi will sell 26,800 tonnes for $3,900/tonne. Put options for 34,425 tonnes are in place at a strike price of $3,900/tonne between October 2010 and June 2012.
The copper price is currently $3,232/tonne well off the high of $8,940 in July 2008.
Metorex owns 50.3% of CRC, with Central African Mining and Exploration Company (CAMEC) holding 43%, but because the latter did not extend an offer to minorities when bought its stake, those shares it holds are now disenfranchised,
giving Metorex 95% of the total voting rights.
CAMEC, which is never far from controversy, said it “vigorously opposes the purported disenfranchisement and will use all avenues available to it to get the shares it holds re-enfranchised as soon as possible.”
Metorex intends delisting CRC and is securing shareholder approval. “Metorex has commenced discussions to secure long-term and project-specific finance to develop the Kinsenda mine.”
CRC owns the Kinsenda mine and the mothballed Musoshi mine, which will be returned to DRC’s state mining company Sodimico as part of the mining title review process.
The flooded Musoshi was one of three mines Metorex operations executive Mario Gericke told SA Mining were priorities in the next seven years to increase the group’s copper production.
Needham said in August the cost to bring Kinsenda into production was $200m. He had said the flooded mine, which Metorex started pumping, could be in
production around mid-2009 and produce 30,000 tonnes/year.
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