TIDMCRA
RNS Number : 7322H
Cradle Arc PLC
19 November 2018
Cradle Arc plc / EPIC: CRA.L / Market: AIM / Sector: Mining
19 November 2018
Cradle Arc plc
("Cradle Arc" or the "Company")
US$4 million Extension to Pre-Existing Working Capital Facility
from Fujax
and Operational Update
Cradle Arc (AIM: CRA), the African focused base and precious
metals exploration and production company, is pleased to announce
that its 60 per cent. owned subsidiary, Leboam Holdings (Pty)
Limited ("Leboam"), the holding company of the Mowana Copper Mine
in Botswana ("Mowana" or the "Mine"), has entered into a binding
term sheet with Fujax Minerals and Energy Limited ("Fujax"),
whereby Fujax has conditionally agreed to provide Leboam with a
US$4 million extension to its pre-existing working capital facility
(the "Working Capital Facility Extension") on similar terms to the
First Advance Agreement concluded in February 2017, as set out in
the Company's AIM admission document published on 18 January 2018.
The extension remains subject, inter alia, to completion of the
requisite documentation and Fujax's final credit committee
approval, expected to occur shortly, and the funds to be drawn down
from the enlarged facility will be used for the group's general
working capital purposes.
In addition, the Company is pleased to provide an operational
update on the Mowana Copper Mine in Botswana.
Operational summary
-- Mowana produced 140 tonnes of contained copper (Cu) in
October 2018 compared to management's original forecast of 392
tonnes.
-- Processing plant continued to experience intermittent
equipment breakdowns during the fourth quarter, impeding
production.
-- Funds received from drawdown on the US$2m loan facility in
October 2018 used to purchase certain essential spares parts and
the repair of key items of equipment to improve the reliability and
availability of the processing plant going forward.
-- Mowana's engineering team has been swiftly effecting
installation and making repairs on site whilst minimising
downtime.
-- Ongoing rehabilitation of boreholes on site after severe
drought conditions affected water supply to the Mine, resulting in
frequent stoppages.
-- Crushing and filter sections of the processing plant have now
been repaired and restored to full availability with major
bottlenecks removed, and stable production is expected for the
remainder of the quarter.
-- Mill availability is improving and the final concentrate
grade achieved throughout Q4 to date has been above forecast
levels.
-- A planned mill reline, scheduled for the last week of
November 2018, is expected to see mill throughput increase to its
nameplate capacity of 155 tonnes per hour.
-- Mining operations have focused on waste stripping in order to
increase space in the open pit.
-- Test results on main ore body in the north pit confirmed that
approximately 2 million tonnes of ore are currently accessible,
with low levels of acid solubility, with internal metallurgical
flotation test work returning Cu recoveries of in excess of
76%.
Kevin van Wouw, CEO of Cradle Arc, commented:
"The extended working capital facility from Fujax is a vote of
confidence in the Mowana operations. Fujax has partnered and
supported Cradle since the acquisition of Mowana as both funder to
and off-taker of mine concentrate and is intimate with the mine
operations and the opportunity the mine brings to the company and
its shareholders. This will help ensure that we have sufficient
headroom and contingency as management seeks to build upon the
stabilised operations and recommence production ramp-up.
The implementation of the previously announced key improvement
and rehabilitation works at the processing plant has now largely
been completed, with the main outstanding items being a full reline
of the mill and continued rehabilitation of the water supply
boreholes from the wellfield 7km from the mine. Accordingly, with
the ores available for processing and operations at Mowana on a
more stable footing, we expect steady improvement in performance of
the project over the coming months."
Working Capital Facility Extension
Fujax has agreed to extend its pre-existing loan facility to
Leboam by an amount of US$4m which, at the sole discretion of
Fujax, can be drawn down by Leboam in any number of tranches up
until 31 March 2019, and will bear interest at a rate of 13.5 per
cent. nominal per annum compounded monthly in arrears. The quantum
drawn down shall be at the sole and absolute discretion of Fujax
having regard to Leboam and Mowana's operating performance,
primarily in the period to 31 December 2018, and the proposed
specific use of the funds concerned.
The Working Capital Facility Extension will be repayable monthly
over a 24 month term, with a six month payment holiday, scheduled
to commence from April 2019. The Working Capital Facility Extension
will be secured by way of a parent guarantee and share pledge
agreement between the Company and Fujax, pursuant to which the
Company will pledge the entire issued share capital of its
subsidiaries, Luiri Limited and Cradle Arc Investments (Pty)
Limited.
The Working Capital Facility Extension agreement will contain
customary terms and conditions, warranties and indemnities,
undertakings and protections for a facility of this nature.
In addition, the Company's current offtake arrangements with
Fujax, as set out in its AIM Admission document, shall be amended
to:
i) reflect an obligation on the Company to sell production from any of its current and future operations/assets in Botswana, whether open cast or underground to satisfy the contracted concentrate tonnage to be supplied;
ii) grant a further right to acquire an additional 80,000 tonnes
of concentrate for every US$1m drawn down under the Working Capital
Facility Extension, subject to a maximum additional amount of
320,000 tonnes; and
iii) grant Fujax a net smelter royalty of 3.75% for the duration
of the offtake agreement once the existing 5% royalty fee in
connection with Fujax's current provision of financing lapses.
In conjunction with the Working Capital Facility Extension, the
Company has also agreed, subject to shareholder approval, to grant
Fujax warrants to subscribe for new ordinary shares in the Company
(the "Warrants"). The quantum of the Warrants is to be calculated
as 20% of the funds drawn down pursuant to the extension
exercisable at a 20% premium to the Company's prevailing market
share price on the date the abovementioned amendments to the
offtake arrangements are implemented.
The Warrants will be exercisable for a period of 24 months from
their date of issue. Accordingly, shareholder approval for the
issue of the Warrants will be sought at a general meeting of the
Company to be convened in due course.
The Working Capital Facility Extension is subject, inter alia,
to completion of the requisite documentation and Fujax's final
credit committee approval, expected to occur shortly.
Operational Update
During the first half of Q4 2018, the processing plant at Mowana
has continued to experience intermittent equipment breakdowns which
has impeded production. The funds received from drawdown on the
US$2m loan facility from Penmin Botswana Proprietary Limited, which
was completed on 19 October 2018, have been applied to the
acquisition of certain essential spare parts and the repair of key
items of equipment in order to improve the reliability and
availability of the processing plant going forward and enable more
robust and continuous processing operations. These parts have
started to arrive on site and Mowana's engineering team has been
swiftly effecting installation and making repairs whilst seeking to
minimise downtime. Additionally, severe drought conditions have
been experienced which have affected water supply to the Mine
resulting in frequent stoppages in order to allow for water
accumulation.
In October 2018, the Mine produced 140 tonnes of contained
copper (Cu) compared to management's original forecast of 392
tonnes. The lower production levels were principally attributable
to longer lead times for a crusher bowl liner replacement from the
original equipment manufacturer (OEM), a breakdown on the filter
plant which also required OEM intervention and frequent stoppages
due to the abovementioned water shortages. Both the crushing
section and filter section have now been repaired and restored to
full availability, whilst water supply has been increased via a
focused rehabilitation of the boreholes that supply the Mine, with
such rehabilitation work ongoing. Mill availability is improving
and the final concentrate grade achieved throughout Q4 to date has
been above forecast levels.
We have taken the opportunity of the downtimes at the processing
plant to focus mining activity on waste stripping in order to
increase the space in the open pit. Consequently, the main ore body
in the north pit is currently sitting at between 950-940 RL with
test results confirming that approximately 2 million tonnes of ore
are currently accessible with low levels of acid solubility, with
internal metallurgical flotation test work returning Cu recoveries
of in excess of 76%. With the crushing and wet sections of the
processing plant now fully operational, and the major bottlenecks
having been addressed and removed, management are confident of
maintaining stabilised operations over the remainder of the quarter
and recommencing production ramp-up. A planned mill reline,
scheduled for the last week of November 2018, is expected to see
mill throughput increase to its nameplate capacity of 155 tonnes
per hour.
**S**
For further information on the Company, please visit
www.cradlearc.com or contact:
Cradle Arc plc Tel: +44 (0)20 7637 5216
Kevin van Wouw
Mark Jones
Strand Hanson Limited Tel: +44 (0)20 7409 3494
James Spinney
Matthew Chandler
James Dance
SP Angel Corporate Finance Tel: +44 (0)20 3470 0470
LLP
Ewan Leggat
John Meyer
Tavistock Communications Tel: +44 (0)20 7920 3150
Limited
Charles Vivian
Gareth Tredway
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) 596/2014.
About Cradle Arc
AIM-quoted Cradle Arc plc is the 60 per cent. owner of the
Mowana copper mine in Botswana, an operational open pit mine and
processing facility located in the north-east of the country,
approximately 120km northwest of Francistown.
The Company has an independent open pit ore reserve estimate
(Proved and Probable JORC 2012) of 31.8Mt at 1.17% Cu for 370,800
tonnes contained copper, based on a Dense Media Separation (DMS)
mine plan.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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