19th Nov 2018 17:42
LONDON (Alliance News) - Cradle Arc PLC said Monday its subsidiary has been granted a USD4 million loan extension as equipment breakdowns continue at the Mowana copper mine in Botswana.
Shares in base and precious metals explorer Cradle Arc closed down 10% at 0.73 pence on Monday.
Mowana processed 140 tonnes of contained copper in October, well below management expectations of 392 tonnes, and intermittent equipments breakdowns persisted in the fourth quarter.
Leboam Holdings (Pty) Ltd, Cradle Arc's 60% owned subsidiary and holding company of the Mowana mine, has entered into a binding term sheet with Fujax Minerals & Energy Ltd.
Fujax has conditionally agreed to further extend its existing loan by USD4 million, which Leboam can draw down in any number of tranches until March 31 and has a 13.5% interest rate per annum, compounded monthly in arrears.
This extends the USD2.5 million existing Fujax loan to USD6.5 million.
As part of the extension, Cradle Arc's offtake agreement with Fujax will be amended to require Cradle Arc to sell production from any of its current and future assets or operations in Botswana to satisfy tonnage supply requirements.
The offtake agreement will also grant Fujax a right to acquire an additional 80,000 tonnes of concentrate for every USD1 million drawn down under the extension up to 320,000 tonnes.
In addition, Fujax will also receive a 3.8% net smelter royalty for the duration of the off-take agreement after the existing 5% royalty fee, in connection with Fujax's current provision of financing, has lapsed.
Subject to shareholder approval, Cradle Arc has also agreed to grant warrants to Fujax to subscribe for new Cradle Arc shares.
The amount of these shares will be calculated at 20% of the funds drawn down under the extension and they will be exercisable at a 20% premium to the market share price.
Cradle Arc Chief Executive Kevin van Wouw noted the progress of works occurring at the Mowana mine and maintained a positive outlook.
"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 7 kilometres from the mine," said van Wouw.
"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," he added.
A USD2 million loan facility from Penmin Botswana Proprietary Ltd has also been drawn down to pay for repairs and spare parts.