Name and Location
Boseto copper operation, Botswana.

Client
Discovery Metals Limited (DML).

Project Description
The Boseto copper operation is located on one of 18 prospecting licences, covering about 13 500 km² within the Kalahari Copperbelt – previously a poorly explored extension of the Zambian Copperbelt.

The project consists of two main prospects – Zeta and Plutus.

A bankable feasibility study (BFS) has indicated that the resources and reserves can support a three-million-tonne-a-year copper/silver operation over a five-year life-of-mine.

The current openpit and pending underground operations will feed a three-million-tonne-a-year concentrator for 15 years. Yearly production is forecast at more than 35 000 t of copper and one-million ounces of silver.

Value
The Boseto mine cost $175-million to develop.

Capital expenditure to first ore production at Zeta is estimated at $26.8-million. The definitive feasibility study on the project expects that the development of the mine will be financed using cash flows from the Boseto openpit operations.

Duration
First copper/silver concentrate from Boseto was sold in June 2012.

Underground mining is expected to start from the Zeta prospect in 2014, with production expected in 2015.

Latest Developments
DML has secured a $110-million investment from equity fund Castlepines Global Equities to develop the Zeta underground mine at the Boseto copper project and to pay its debts.

DML was forced to find new funding after revealing earlier this month that its negotiations with Cupric Canyon Capital, regarding the possible sale of Boseto mine, had failed.

Under the terms of the memorandum of understanding (MoU) inked with Castlepines, the equity investor will invest $110-million in DML’s wholly owned subsidiary Discovery Copper, which owns the Boseto project.

In return, Castlepines will receive a 34% interest ownership in Discovery Copper.

DML’s 66% remaining ownership in Discovery Copper will be pledged as security to Castlepines during the 12-year term of the investment. The investment will attract a commercially competitive coupon rate, which will be subject to a yearly fixed escalation factor.

The Zeta underground mine has been a key strategic component of the Boseto development plan since its inception in August 2010.

“This was reaffirmed during our life-of-mine planning that was completed in early 2014. The future of the Boseto operation, and the entire mineral district, lies in the development of underground mining, ” says Discovery MD Bob Fulker.

The Boseto mine is expected to be mothballed in the next six months, after a review of the openpit operations determined that the prevailing high strip ratio would result in a high operating cost environment, which is not sufficiently cash-flow positive amid the prevailing copper price.

However, DML is still pursuing the development of the Zeta underground mine.

“I have high hopes that within the Boseto mineral district, we will have a minimum of three distinct mines with potentially five declines over the next decade, of which the Zeta underground will be the first,” Fulker says.

The closing of the financing is expected to take place following the execution of definitive documentation between the two parties, as well as DML satisfying any conditions precedent.

The MoU is subject to several conditions, including a due diligence study and the implementation of risk management strategies, as well as government and board approval by both companies.

Key Contracts and Suppliers
Transamine (concentrate offtake agreement) and Standard Bank Chartered, Standard Bank, Credit Suisse and Caterpillar Finance (banking syndicate lead financial arrangers).

On Budget and on Time?
Yes.

Contact Details for Project Information
Discovery Metals, tel +61 7 3218 0222, fax +61 7 3218 0233 or email info@discoverymetals.com.au; or Discovery Metals Botswana, tel +267 318 0751 or fax +267 318 0752.