Loss-making Discovery Metals Limited this week announced that it has no option but to retrench dozens of its employees at the Boseto Copper Project, with Country Manager Mokwena Morulane downplaying union concerns and assuring shareholders that operational costs will be put under control.
According to Morulane, the decision was part of a Marshall Plan aimed at improving efficiency at the loss making junior miner amid constrained cash flow. About 85 staff members at Boseto in Toteng near Maun will be affected.
“The decision was taken after exhausting all other avenues. The decision was best for the company,” he told BG Business. The Botswana Stock Exchange-listed miner employs more than 500 people at Boseto.
Jack Tlhagale, the President of the Botswana Mine Workers Union (BMWU) has confirmed that the union consulted the mine over the matter. He said BMWU had suggested other options other than retrenchment.
According to Morulane, the decision to downsize was done to ensure that the company’s mining activities are sustained, without necessarily compromising on production.
Previously, Morulane said the company’s balance sheet has been battered by costs associated with generating its own electricity, unlike other miners such as Tati Nickel and BCL. In yet another desperate bid to bring back its balance sheet to normalcy, the Brisbane based company said it is reviewing all contracts at Boseto mine.
Some of the contractors include the JSE-listed Basel Read. The retrenchments come at a time when the firm has just announced that proposed funding negotiations with Singaporean based firm, Blumont, have collapsed.
Under the deal, Blumont was supposed to have injected $ 100 million (about P800 million) into the company’s coffers. Morulane said they have since started the search for potential financiers.
He added that the company’s financial challenges can also be attributed to unstable copper prices. The fluctuating copper prices have caused mismatch between cost of production and selling price. On Tuesday, copper prices fell to $7,280 a tonne from $7,329 at the close on Monday, Reuters news agency reported.
Discovery Metals’ current financial stress can also be traced to its losses in the past year. The company reported a US$224.3 million loss for the 2013 financial year to June 30, 2013. Its financial troubles have since affected its ability to pay lenders. In a statement released late Wednesday, Discovery Metals stated that it has not paid a principal repayment of $17.5 million to lenders.
In 2011, a consortium of banks that include Standard Chartered Bank, Standard Bank and Credit Suisse borrowed the company a total of $180 million.
Lenders have since granted Discovery Metals a further waiver up until February 2014. . Morulane said they are confident that they will repay lenders as cash flow challenges are being addressed. As the company’s financial quagmire continues, its share price at the BSE continues to plunge dramatically to 60 thebe, from 1090 thebe a year ago.