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African Copper plc Final Results for the Year to 31 March 2013 - production of copper increased by 37%

 

African Copper plc (AIM:ACU)(BOTSWANA:AFRICAN COPPER), announces preliminary audited results for the year ending 31 March 2013. 

 

Summary

 

  • In 2013, production of copper increased by 37% to 9,496 Mt (2012: 6,910 Mt). Record production levels were seen in March 2013 with 1,314 tonnes of copper in concentrate produced.
  • Increases in production levels and operational improvements led to revenues increasing by 41.3% to US$60.5 million (2012: US$ 42.8 million).
  • Past production issues were addressed to create stable and efficient operations to achieve operating profit from mining operations of US$13.7 million (2012: Loss of US$4.6 million).
  • At the Mowana Mine, the plant processed an average of 66,825 tonnes of ore per month (2012: 61,577 Mt).
  • 801,901 tonnes of ore were processed this year, a 9% increase from last year (2012: 738,921 Mt). This was all from the Thakadu pit with an average grade of 1.78% (2012: only 73% from Thakadu at 1.93%).
  • Overall loss of US$15.8 million due to administrative costs, increased finance costs and foreign exchange losses which was still a reduced loss on the prior year (2012: US$42.6 million).
  • In March 2013, we saw the Company's controlling shareholder ZCI limited ("ZCI") suspend its process to unlock value from its investment in African Copper as its board believed it had not received proposals that reflected the true value and potential of the Company. As a result, we have continued to see strong support from ZCI during the year as its board continues to work towards realizing the full value of its investment in African Copper.

 

Commenting on the results, Jordan Soko, Acting CEO of African Copper, said: "This has been a strong year for African Copper."

 

"We are not yet free of all our operating challenges but we have made significant progress this year in realizing the full potential of our assets and improvement in our key operating measures. We expect more stable conditions to continue throughout the current year which should allow further encouraging progress from our projects, and in particular from our exploration project in Matsitama."

 

 

 

CHAIRMAN'S STATEMENT

 

This has been an overall strong year for African Copper. We made clear progress toward realizing the full potential of our assets, and we generated improvements in all of our key operating measures. The Company increased its production levels and recovery rates, and generated an operating profit from its mining operations, while significantly reducing its overall net loss. We expect generally more stable conditions to continue through the coming year, and we anticipate further encouraging progress from our exploration project at Matsitama. Overall we remain confident in our Company's future.

 

Overview

 

We continued our progress this year towards achieving stable operations at the Mowana mine facilities in north-east Botswana. For the year ended 31 March 2013, we produced copper in concentrate of 9,496 tonnes, 37% higher than the prior year, and we achieved record production levels in March 2013 of 1,314 tonnes of copper in concentrate. We processed 801,901 tonnes of ore in 2013 compared to 738,921 tonnes in 2012 - a 9% increase - and all the ore processed during the year came from the Thakadu pit with an average grade of 1.78%; in 2012, the average grade was 1.93% with 73% of the ore coming from the Thakadu pit and the balance from the Mowana pit. Average recovery rates increased to 66.5% from 48.0% for the year as whole, with the latter months of the financial year recording substantially higher recoveries as was the case in December 2012, when we recorded our highest recovery rate for a month, at 95.6%.

 

On the whole, we expect more stable conditions to continue throughout the current year and for recovery rates to remain above 80%. This shift will also correspondingly reduce our reliance on costly chemical reagents for treating oxide ores - a significant expense.

 

Our operating costs per tonne remained above budgeted levels. Maintenance costs, caused by major component inefficiencies and design upgrades throughout the plant, were higher than we originally anticipated. On average, the plant processed about 66,825 tonnes per month during the year compared to 61,577 tonnes in 2012, lower than its design capacity of 90,000 to 100,000 tonnes per month. While we have now addressed many of the past production bottlenecks, the process of treating both oxide and sulphide ores during the year from the Thakadu deposit required changes to settings, all of which increased our production-related costs.

 

Results

 

As a result of increased production levels and average copper grades of 1.78% from the Thakadu deposit, revenues for the year to 31 March 2013 increased to US$60.5 million (2012: US$42.8 million). Despite this significant increase in revenues, our operating costs, when compared with the prior year, declined as the Company moved past the challenges it experienced in previous years towards more stable and efficient operations. As a result we recorded an operating profit from mining operations of US$13.7 million, compared to an operating loss from mining operations of US$4.6 million in 2012.

 

Administrative costs increased, in large part reflecting increased staffing costs. Taking into account a foreign exchange loss of US$11.4 million (2012: loss of US$6.3 million) and increased finance costs of US$10.0 million (2012: US$8.6 million), the Company incurred an overall loss of US$15.8 million, much reduced from a loss of US$42.6 million in the prior year. 

 

Exploration

 

During the current financial year, we focused our exploration activities primarily in the Nakalakwana area, within prospecting licence PL 17/2004. We carried out an intensive review of all the geological data in the Nakalakwana area, resulting in an eight hole diamond drilling programme targeting iron oxide, copper and gold ("IOCG") mineralization. Drilling results to date have been very promising with rock types and alteration intersected, as seen in other IOCG type deposits. The average footprint of an IOCG deposit worldwide is 10 hectares (500 x 200 metres). Given that the area being explored is greater than 30km2, we are currently assessing modern geophysical techniques to identify areas of high prospectivity before further drilling is undertaken.

 

Exploration expenditure, mainly within PL 17/2004, totalled US$1.7 million for the financial year.

 

Financing

 

The Company's controlling shareholder ZCI Limited ("ZCI") continued to provide strong support during the year. ZCI provided an additional US$6.0 million convertible loan at a simple interest rate of 7 per cent., repayable on 31 March 2014. At 31 March 2013, our consolidated principal debt was US$93.7 million (including US$18.7 million of accrued interest), all of which we owe to ZCI, and we have net current liabilities of $86.4 million, up $20.1 million from our net current position of $66.3 million at 31 March 2012. ZCI has agreed to defer all principal and interest payments arising from our debt obligations until June 2014.

 

In February 2012, the Company reported to shareholders that ZCI had initiated a process intended to unlock value from its investment in African Copper. However, in March 2013, we advised shareholders that the board of ZCI has elected to suspend this process in light of the effect of adverse global market conditions on junior mining companies and the general increased risk aversion among investors. ZCI had received a number of proposals which its board believed did not reflect the intrinsic value of African Copper and accordingly chose not to proceed with any of those proposals. ZCI's board is continuing to work towards realising the full value of its investment in African Copper.

 

Outlook

 

We are not yet free of all our operating challenges but in the context of our operations at the Thakadu pit, we have well founded expectations that their magnitude and impact will continue to diminish. We experienced some production issues subsequent to the end of the year, necessitating production delays for approximately 15 days in April 2013. We have ordered new mill gear critical spares which we expect to be available for installation in August 2013. On the whole however, we expect more stable conditions to continue throughout the current year and for recovery rates to remain above 80%, allowing continuing improvement in all our key operating measures.

 

We have commenced the preparation work at the Mowana pit, which has been on care and maintenance, to allow for full mining operations to commence there again from October 2013. A successful restart of Mowana, properly co-ordinated with working out the Thakadu pit over the next nine months, is essential to the success of the Company over the next two years and beyond and the Board is ensuring that appropriate focus and resources are devoted to achieving our objectives.

 

We will continue, of course, to benefit from our highly capable team, and its unflagging commitment to our Company's success. I would also like to thank our Board; our acting chief executive officer, Jordan Soko, for his leadership; and our team of managers and employees for their outstanding efforts and commitment. I am confident that their contributions will ensure a bright future for African Copper. 

 

Finally, I would like to thank our major shareholder, ZCI, for its Directors' belief in our assets and the financial support they have provided and continue to provide which is critical for the success of our business. The Board expects to report further progress towards our goals during the current financial year.

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