Home » News » General » How troubled Boseto mine collapsed

How troubled Boseto mine collapsed

Publishing Date : 09 March, 2015

Author : JOSEPH KGAMANYANE


After barely three years of operation, Boseto mine has been closed after being declared insolvent by its Board of Directors.  The Discovery Metals Limited’s 100% owned copper mine has had a series of operational difficulties and battled debts since production commenced in the first half of 2012.

The financially troubled mine in its last quarterly report (Q2 FY15) experienced a mass decline by 13% of its copper production compared to Q1 FY15. The Copper Mine which lies in the north-west part of Botswana, about 90KM from Maun had an initial evaluated mine life of 15 years with an expansion plan that was to increase the life of the mine to 25 years.

On the fateful morning of Friday 27 the company was forced to shut down its operations, leaving about 422 miners unemployed. Reports are that this came after the company’s Managing Director and also Chief Executive Officer, Bob Fulker announced to the employees that its Group lenders in Australia submitted a letter of demand for an immediate payment of 103 million US dollars from the company and that they would not be accepting any further proposal from alternative potential investors.

With the help of Botswana Police Service and the Directorate of Intelligence Services and Security workers, the employees were forced to evacuate the mining premises and raided into buses which transported them to Maun.

DML recently published a market release titled “Appointment of Administrators” dated 27 February 2015 which explains how the company came to be declared insolvent. In the statement the company announces that its Board of Directors has appointed Michael Ryan and Stefan Dopking of FTI Consulting as voluntary administrators of the company effective 27 February 2015, pursuant to section 436A of the Corporations Act of 2001.

According to the report, the administrators are working with the company’s management to fully understand the options available to the group, which may potentially include seeking expressions of interest to purchase the business and assets, a restructure or recapitalization of the group.

DML explained that the receipt of the Friday 27 2015 correspondence from its Lender Group who demanded from the company full and immediate repayment of all monies comprising principal repayments, interest and costs was only the beginning.  

On the 9th February 2015, DML entered into a Memorandum of Understanding (MOU) with Castlepines Global Equities Limited (Castlepines). Under the terms of the MOU Castlepines proposed to invest US$110,000,000 into the DML’s wholly owned subsidiary Discovery Copper (Botswana) (Proprietary) Limited (DCB), which would provide Castlepines with a 34% interest in DCB with the company holding the remaining 66% interest in DCB.  

According to the report part of the investment was intended to be utilized by the Company and DCB to pay-out the loan from Cupric Canyon Capital LP (Cupric) of US$5,000,000 pursuant to the Facility Agreement dated on 28 November 2014. Also to negotiate the settlement of the existing loan finance facility with the Company’s secured lending syndicate (based on the MOU) and sufficient capital to undertake the required underground development.

However, following provision of the MOU to the Company’s Lender Group DML received a Notice of Event of Default dated 10 February 2015 from the Lender Group advising that the execution of the MOU by the Company was a likely breach of the Amended and Restated Facility Agreement dated 13 July 2014.  The Company then disputed the position taken by the Lender Group in this Notice of Event of Default.

The statement further indicated that as a result of the Notice of Event of Default dated 10 February 2015, Cupric also issued a “Notice of Default and Reservation of Rights.” The notice was claiming breach of the Facility Agreement between the DML and Cupric dated 13 February 2015. According to the report Cupric is provided with a right to issue a notice of default via the Priority Deed pursuant to the Cross Default provisions.

It is underscored that members of the DML Board and Executive Team then traveled to London to engage in discussions with the Company’s lending syndicate. The purposes of these discussions were to resolve any issue provided for under the disputed Notice of Event of Default dated 10 February 2015.

It was also meant to discuss the MOU with Castlepines and the actions required by the parties to proceed progressing with the transaction contemplated under the MOU and any other matter relevant to the Amended and Restated Facility Agreement dated 13 July 2014 which either party considered necessary to resolve.

Following these discussions and at the express request and encouragement of the Lenders, DML reports to have then formally wrote to the Lenders requesting written agreement of retracting the Notice of Event of Default dated 10 February 2015. It also demanded implementation of a Standstill Period of no less than six months pertaining to all obligations and requirements pursuant to the Amended and Restated Facility Agreement and whereby no enforcement action would be taken by the lending syndicate. 

In addition it also requested for the lending syndicate to accept the proposal of Castlepines to settle all amounts owing by DML in accordance with the terms provided for in the MOU with Castlepines. Also to complete a Share Purchase Plan or Rights Issue allowing for interim funding to be raised to provide the Company with some working capital and to pay part or all of the Loan payable to Cupric pursuant to the Facility Agreement dated 28 November 2014.

In response DML is reported to have received a notice that the Lender Group will not provide the written agreement requested by the company.  The statement reveals that DML remains in default of the Restated and Amended Facility Agreement with the lending syndicate dated 13 July 2014 and the Facility Agreement with Cupric dated 28 November 2014. It adds that the Company is unable to remedy these defaults.

Cartoon

Polls

Do you think the courts will help put the UDC, BMD impasse within reasonable time ahead of the 2019 General Election?

banner_14.jpg
banner_12.jpg

POPULER BRANDS