Lobatse High Court has placed African Copper Mining under liquidation after the company failed to fulfill contractual payment obligations to Diesel Power Mining.
Diesel Power Mining petitioned the court to liquidate African Copper for delayed payments. Lobatse High Court Judge Abednigo Tafa placed the mining company under provisional order of winding up in the hand of the Master of the High Court. In his order made last week Friday Tafa appointed Massimo Marinelli as provisional liquidator, pending the appointment of a liquidator by the Master of the High Court.
He ordered that the Provisional Liquidator shall in terms of Section 384 (4) (e) of the Companies Act carry on or discontinue the business of African Copper Mining and continue or terminate contracts to which African Copper Mining is a party if deemed desirable by the Provisional Liquidator.
The judge stated that all actions or proceedings against the respondents (African Copper) currently before the court are hereby stayed. Justice Tafa issued a rule nisi calling upon all interested persons to appear and show cause on 11th December 2015 or soon thereafter, stating why an order should not be granted in terms that “the provisional winding up order be made a final order; the costs of this petition be costs in winding up of the respondent; authorizing the Provisional Liquidator, in terms of Section 384 (4) (e) of the Companies Act, to carry on or discontinue the business of the respondent and continue or terminate contracts to which the respondents is a party deemed desirable by the Provisional Liquidator and all actions against the respondent be stayed.”
African Copper through its subsidiary Messina Copper Botswana Pty Ltd awarded a long-term contract to provide hard-rock open cast mining services to Diesel Power Mining Pty Ltd a subsidiary of Buildmax Limited in respect of African Copper’s existing open pit copper mining operations at Thakadu and Mowana mines.
A statement released by Diesel Power’s JSE-listed parent company, Buildmax last week revealed that a provision against the debt is likely to affect the company’s 2016 financial results by up to R90 million.
It said Diesel Power Botswana’s current aggregated exposure to Messina Copper Botswana is approximately P47 million.
The statement said at the date of this announcement, the board of directors of Buildmax could not reliably estimate the extent of any potential proceeds arising as a result of the liquidation proceedings. The $112.7-million (about P1 billion) contract, which started in February 2014 and had a duration of 52 months, would see Diesel Power undertake mining activities at Thakadu for the first four months before moving to Mowana Mine for the remaining 48 months.
The scope of the contract outlined the application of conventional open pit mining and drill, with the majority of the required $18-million mobile plant and equipment to be sourced from the existing Buildmax fleet. All required asset-based funding were to be jointly funded by Diesel Power and a third-party financier. Under the terms of the contract, Diesel Power would deploy a “highly-qualified” management team with extensive experience in Africa, while Buildmax would establish permanent support structures at the Mowana Copper Mine.
This week the Minister of Minerals, Energy and Water Resources, Kitso Mokaila told Parliament that since the economic downturn in 2009, Mowana Copper Mine has been struggling to keep a positive cash flow, which prompted government to defer royalties in order to sustain the mining operation and avert closure. He said operations at Thakadu Mine have been suspended since February this year, while at Mowana Copper Mine. “Mowana Copper Mine has been receiving support from its shareholders through funding and guarantees to help them meet liabilities.
The mining contractor at Mowana Copper Mine, Diesel Power Limited suspended operation on 10October 2015 citing delayed payments as reasons. Mowana Copper Mine then submitted a payment plan to Diesel Power Limited, however the plan was rejected and the contractor approached the court for intervention to liquidate Messina Copper”, he said.
Mokaila stated that the world copper price is currently at a six year low and the last time copper price sat below US$6,000/tonne was in 2009. He said government continues to attempt to save the operation by deferring royalty payments due from Mowana Copper mining in order to assist in the company cash flow.
He told Parliament that shareholders have indicated on their commitment to support Mowana Copper Mining in order to maintain employment of over 300 direct employees and 200 indirect employees