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Trafigura has extended its rights for the offtake of 100% of the copper concentrates produced at the Dikulushi and Kapulo mines in the Democratic Republic of Congo as part of a $33.4 million refinancing deal with Mawson West.
The funding package with Galena Asset Management, Trafigura’s wholly-owned subsidiary, will help to resolve Mawson West’s “serious financial difficulty”, the TSX-listed mining company announced on Thursday December 11.
Mawson West will apply for a hardship exemption from the TSX in order to access the funds prior to a shareholder vote on the deal, the company added.
Galena has agreed to take equity in and issue loans to Mawson West, while also extending the maturity of its existing loans to the junior miner and pledging to backstop any future equity issuances with a purchase commitment of at least $8.64 million, Mawson West told investors.
The deal extends an existing $50 million offtake deal signed by Trafigura in April, which starts from the date of first production at Kapulo and runs until December 2018.
Kapulo was commissioned in November and the mine is on track to start production in the first quarter of next year, after which it will ramp up to 20,000 tpy of contained copper over an initial seven-year mine life.
The $50 million deal signed in April was designed to fully fund the development of Kapulo, but in November the company announced that it was in advanced negotiations with potential strategic partners to improve its balance sheet, owing to capex pressures and the deteriorating near-term outlook for copper prices.
The new deal extends Trafigura’s rights to offtake from Kapulo and Dikulushi for up to a further five years, and also grants the trading house a right to match any subsequent third-party offtake arrangements for a further five years afterwards, Mawson West announced on Thursday.
In addition to buying shares worth $5 million, the Galena Private Equity Resources Fund has also extended a $10 million secured loan and a $5 million unsecured bridge loan to Mawson West, both payable at a 12% annual interest rate.
The trading house has also secured share warrants exercisable at $0.15 per share. If fully taken up, the options would result in a material change in control of the company, Mawson West announced.
Under exchange definitions, the warrants entitle Trafigura to take on the additional stake at less than market price, and as a result the deal would ordinarily require prior approval from shareholders.
But because of the urgency of its funding requirements, Mawson West will apply for an exemption from this requirement, it announced.
“The board of directors has unanimously agreed that the company is in serious financial difficulty in light of its immediate capital requirements, and that the proposed transaction with Galena is designed to improve the company’s financial situation, is reasonable for Mawson West in the circumstances, and represents the only solution practicably available to Mawson West,” the company told investors on Thursday.
Mawson West acquired the interests in Kapulo and Dikulushi through the purchase of a 90% stake in Anvil Mining Congo (AMC) Sarl in 2010.
Trafigura was a 39% shareholder in Anvil Mining, AMC’s former parent company, prior to its acquisition by MMG Ltd in February 2012. Trafigura continues to hold life-of-mine offtake rights from the Kinsevere mine, a former Anvil asset also located in the DRC.
Mark Burton mburton@metalbulletin.com Twitter: @mburtonmb