Not so much African Copper

African Copper (ACU-T, ACU-L) is closing the doors on its Mowana mine in Botswana.

The story is sadly becoming a familiar one for base metal producers: Low prices fuelled by falling demand for copper have created a working capital deficit resulting in the company urgently needing US$15 million to meet its working capital needs.

African Copper could only offer that it was in negotiations with lenders and that the shut-down will span at least three weeks.

It will try to re-negotiate the amount and timing of its obligations coming due it says.

In its most recent financial statements for the three month period ending Sept. 30, 2008, the company reported total contractual commitments of $19.7 million. The bulk of that was to go to mining contract termination and a mining contract bank guarantee.
For the same period the company reported current assets of $18.8 million.

Also wounding the copper miner was an impairment charge of 50% or $73 million on the mining project and its related plant in equipment. That write-down came as a result of lower copper prices.

The situation is so dire that African Copper admitted that if it can’t drum up the required financing, it won’t be able to continue as a going concern.

African Copper’s 100% owned Mowana Mine started mining in January 2008 and the first shipment of copper concentrate was sent out at the end of October.

But the ramp-up to commercial production was stalled by production delays in the fourth quarter thanks to a lack of spare parts, the working capital deficit and unexpected equipment failures.

“These delays have resulted in production shortfalls during the quarter from the copper in concentrate production forecast of approximately 1,500 tonnes to 270 tonnes,” the company says in a release.

Mowana is located roughly 10-km west of the city of Francistown, in north-eastern Botswana.

The mine has proven and probable reserves of 14.8 million tonnes grading 1.11% copper for 361 million lbs. of copper and has a measured and indicated resource of 87.6 million tonnes grading 0.71% copper for 1.4 billion lbs of copper.