Copper 360 and Mazule Resources Proprietary Limited (“Mazule”), the shareholder of Nama Copper, have entered into an agreement to acquire all the shares and claims in Nama Copper for a consideration of R200 million (“the Transaction”). The key benefit of the Transaction is that it will significantly increase the Company’s copper concentrate production capacity and output, with the 2025 output more than doubling compared to the original estimates.
RATIONALE FOR THE TRANSACTION
Copper 360 will benefit in a number of ways from the Transaction, including:
- Increased surface rights contiguous to Copper 360 ‘s Nababeep Processing Facility;
- A fully operational copper concentrate plant with the capacity to treat 20kt/month of copper sulphide ore at recoveries of between 88% to 92%;
- Additional copper tailings resources representing approximately 22,9Mt with a grade between 0,35% and 0,65% Copper in situ, as well as an additional copper slag resource;
- Additional diesel generator capacity of 2.5MW;
- An operational fleet of yellow equipment;
- A mining licence together with a water use licence application ready for submission;
- Increased tailings disposal optionality for the group; as well as
- An offtake agreement with Mazule for copper concentrate produced, including the provision of a R50 million working capital facility (refer to significant terms of the acquisition below for detail in this regard).
Jan Nelson, CEO of Copper 360, South Africa’s only listed copper producer, commented; “The acquisition of Nama Copper is a game changer for Copper 360. It allows us to more than double our concentrate production of 3,899 tonnes of copper metal per annum planned from the current concentrate plant, which is in the final construction phase, to 7,975 tonnes of copper metal per annum. The Nama Copper concentrate plant is fully operational and will increase production by 3,595 tonnes of copper metal. The Nama Copper plant will ensure that the revenue of R2,2 billion planned for the FY 2026 will now be able to be delivered in FY 2025. The ore feed for both plants will come from the Rietberg mine. In addition, the copper tailings resource being acquired represents between R12 billion to R24 billion in copper metal in the ground at a copper price of US$8,500/t and an exchange rate of R19.00/USD and could result in a significant increase of the Company’s Measured and Indicated Resource category upon further confirmatory drilling. The sellers of Nama Copper have also agreed a commercially competitive offtake agreement through one of its associate companies with Copper 360.”
THE NAMA COPPER BUSINESS
Nama Copper is a copper producer located adjacent to Copper 360’s operations in Nababeep. It has historically processed copper slag through a sulphide flotation plant that is almost an exact replica of the modular flotation plant that Copper 360 is currently constructing. Nama Copper’s slag operations have become uneconomical, and it has not been able to replace the slag with economically viable sulphide ore resources. The plant has the capacity to treat 20 000 tonnes of sulphide ore per month with recoveries between 88% and 92%. In addition, Nama Copper owns significant tailings resources. Nama Copper also operates a metal reclamation plant on its Nababeep premises but that is specifically excluded from the Transaction. Mazule is entitled to continue operating the metal reclamation plant from the Nama Copper premises for a period of two years from the date of the First Tranche payment on a “no charge” lease.
BENEFICIAL OWNERS OF NAMA COPPER
The beneficial owners of Nama Copper are Mazule Resources Proprietary Limited.
SIGNIFICANT TERMS OF THE ACQUISITION AGREEMENT
The key terms of the agreement can be summarised as follows:
- Copper 360 will within 14 business days of signature of the agreement (being 28 November 2023) pay R50 million in cash and R50 million in shares to Mazule, to be placed in an escrow account until the due diligence is completed (“the First Payment Tranche”). The obligation to issue the shares (R50 million) will be offset against the working capital facility to be provided by Mazule in terms of the Offtake Agreement, effectively constituting the working capital facility as a vendor finance arrangement, secured by an obligation to issue Copper 360 ordinary shares to Mazule in the event that the Offtake agreement is not honoured in whole or in part;
- Copper 360 will have 4 months from the date of the initial cash payment due, to complete a due diligence on Nama Copper;
- The First Payment Tranche is not refundable unless Copper 360 establishes materially adverse facts or circumstances regarding the business and operations of Nama Copper arising directly from the Due Diligence Investigation during the Due Diligence Period;
- Copper 360 will upon completion of the Due Diligence Period pay Mazule a further R100 million in cash;
- Copper 360 will, once the First Payment Tranche has been paid, operate the Nama Copper Plant, based on a “no charge” lease agreement with Mazule, until a section 11 approval, if required, is granted.
TERMS OF THE OFFTAKE AGREEMENT
The detail terms of the offtake agreement remain confidential and may not be disclosed, however Copper 360 will receive payment of approximately 80% of the prevailing LME Copper price on delivery on an “ex works” basis.
CATEGORISATION OF THE TRANSACTION
In terms of the JSE Limited’s Listings Requirements the Transaction is classified as a Category 2 transaction and therefore does not require shareholder approval.
There are no related parties involved in the Transaction.
CONSIDERATION AND SOURCE OF FUNDING
The Company will acquire all the shares and claims in Nama Copper for a consideration of R200million.
The Company is in the process of entering into debt and royalty agreements to fund the Transaction and will provide more details to shareholders in due course. The funding structures will not have a material dilutionary effect on Copper 360 shareholders.
NET ASSET VALUE OF NAMA COPPER
Based on the latest available statement of financial position of Nama Copper (unaudited management accounts at 31 August 2023) the value of the net assets that are the subject of the Transaction is R59.8 million
PROFITS ATTRIBUTABLE TO THE NET ASSETS OF NAMA COPPER
The Nama Copper flotation plant is currently under care and maintenance and no trading is taking place and, accordingly, there is no current profit or loss attributable to the net assets.
The effective date of the Transaction will be the date of the First Tranche Payment being made.
For purposes of paragraph 9.16 of the Listings Requirements, the Company shall ensure that after the closing date nothing in the constitutional documents of Nama Copper will, in any way, frustrate or relieve the Company from its compliance with the Listings Requirements.