LONDON (ResourceInvestor.com) -- African Copper will list on London's alternative market this Friday, in a lb15m issue priced at 76p. The company has multiple interests in Botswana, but the funding is centred on the Dukwe copper deposit which is estimated to contain 1.3bn lbs of copper deposited as oxides and sulphides.
As well as Dukwe, the company's other interests consist of the Matsitama prospecting licences, adjacent to Dukwe and covering 4,000 square kilometers. This area includes four substantial mineralised regions with in excess of 170 possible copper-zinc deposits, excluding two known copper deposits requiring further evaluation.
Early estimates put the net cash flow from Dukwe at $319 million based on a mine life of 18 years. The oxides are expected to yield 24m lbs of copper per annum, while the sulphides should produce 71m lbs a year. Dukwe and Matsitama have together been valued by independent consultants ACA Howe at between $128m and $142m, based on a copper price of $1/lb.
The new capital will be utilised for a full bankable feasibility study of the Dukwe operation by MDM covering the detailed engineering requirements for both the sulphide and oxide resources. Further exploration of the Matsitama area will also be undertaken, with a view to future development on the back of cash flow from Dukwe.
At Dukwe the company plans an open cast operation followed by heap leaching, solvent extraction and electrowinning recovery for the oxide deposit, while the sulphides will be mined underground before processing into concentrate.
Chief Executive David Jones puts the capital requirement to bring the Dukwe copper operations to production at $66m, of which the oxide operation will account for $40m, $10m of this being sunk into a sulphuric acid plant required for treatment of the oxide. The sulphide operation will cost $26m to bring to account. Excess production of acid will provide another revenue stream for the company.
According to Jones the company has a number of options to procure the necessary funds, including the issue of additional share capital. The company is also negotiating with a number of banks and metal trading houses. It may come to an agreement with one of the latter on offtake, and Jones says that any deal would also include equity.
African Copper anticipates no problems divesting its production and will either sell to a metal trading house at the mine gate; Glencore is said to be interested in buying the mine's entire output, or alternatively the company has been in discussions with smelters, specifically the respective owners of Tsumeb in Namibia and Phalaborwa in South Africa.
Jones is sanguine about the adverse impact of the South African rand on the monetary area it controls. Project cost estimates have been based on a rand to dollar rate of 6.5 versus today's 6.2. Jones states confidently that if the rand strengthens further 'many other companies will be in a worse position than us'.
He is also optimistic about operating in Botswana, citing its relative stability and ease of access to world markets. The country has enjoyed four decades of civilian leadership, and social stability with significant capital investment to produce one of the most dynamic and lowest risk economies in Africa.
The company's interests in Botswana were acquired in 1996 after chief executive David Jones encountered the prospects while acting as a consultant in the country for another firm. Preliminary drilling revealed a substantial copper sulphide deposit with an oxide cap and production possibilities have been under investigation in earnest since 2002.
Dukwe deposit was first discovered in 1906 but exploration was abandoned in 1913 due to lack of infrastructure, a problem which no longer exists as the area now possesses road and rail access as well as power and water. The Matsitama area as a whole has been intensively explored leaving a large amount of data for the rest of the concession.
The outlook for copper as a commodity is solid, with China's rapid industrialisation providing the primary impetus due to continuing development of electricity and telecoms networks and the increasing motorisation of the populace.
Jones described the Dukwe project as 'world class' and expects the 'worldwide dearth of copper' to augur well for the mine and any future copper projects within the Matsitama area. As well as these extra deposits, the company expects further additions to the oxide and sulphide reserves at Dukwe itself. Preliminary drilling has confirmed the existence of further mineralization, which will be quantified once the main production is under way.
The current feasibility studies are scheduled for completion by the second quarter of next year, and the company expects Dukwe to be in production by the second quarter of 2006.