Wesbank

Bankrupt Discovery Metals under the hammer

SHARE   |   Sunday, 01 March 2015   |   By Keitebe Kgosikebatho


• DML's Boseto mine shut down
• Creditors attach Boseto assets
• Workers evicted from mine premises

Discovery Metals Limited (DML) has been suspended from trading in both the Botswana Stock Exchange (BSE) and the Australian Securities Exchange (ASE) after the company was declared insolvent on Thursday.
A statement from DML dated the 27th of February announced that the Board of Directors has appointed Stefan Dopking and Michael Ryan of FTI Consulting as Voluntary Administrators of the Company under Part 5.3A of the Corporations Act after the declaration of insolvency. The statement said the decision to appoint Voluntary Administrators follows the receipt of correspondence on Thursday from DML’s Lender Group demanding full and immediate repayment by DML of all monies (comprising principal repayments, interest and costs).
The statement further revealed that on 9 February 2015, the Company entered into a Memorandum of Understanding with Castlepines Global Equities Limited. Under the terms of the MOU, Castlepines proposed to invest US$110,000,000 into the Company’s wholly owned subsidiary Discovery Copper (Botswana) (Proprietary) Limited, which would provide Castlepines with a 34% interest in DCB.
Part of the investment was intended to be utilised by the Company and DCB to among others pay-out the Loan from Cupric Canyon Capital LP (Cupric) of US$5,000,000 pursuant to the Facility Agreement dated on 28 November 2014; negotiate a settlement of the existing loan finance facility with the Company’s secured lending syndicate (based on the MOU); and sufficient capital to undertake the required underground development.
DML indicates that following provision of the MOU to the Company’s Lender Group the Company received a Notice of Event of Default dated 10 February 2015 from the Lender Group advising the execution of the MOU by the Company was a likely breach of the Amended and Restated Facility Agreement dated 13 July 2014. The Company disputed the position taken by the Lender Group in this Notice of Event of Default.
It is stated that as a result of the Notice of Event of Default dated 10 February 2015, Cupric also issued a “Notice of Default and Reservation of Rights” notice, claiming breach of the Facility Agreement between the Company and Cupric dated 13 February 2015. Cupric is provided with a right to issue a notice of default via the Priority Deed pursuant to the “Cross Default” provisions.
 
Although it is further stated that the DML team would later travel to London in the week commencing 16 February 2015 to among others resolve any issue provided for under the disputed Notice of Event of Default dated 10 February2015; and to further seek relief on all issues affecting their deal with the lender and in the MOU with Castlepines; and to complete a Share Purchase Plan or Rights Issue allowing for interim funding to be raised to provide the Company with some working capital and to pay part or all of the Loan payable to Cupric pursuant to the Facility Agreement dated 28 November 2014 their efforts hit a blank. “The Company has now received notice that the Lender Group will not provide the written agreement requested. The Company remains in default of the Restated and Amended Facility Agreement with the lending syndicate dated 13 July 2014 and the Facility Agreement with Cupric dated 28 November 2014. The Company is unable to remedy these defaults,” the release read.
As a result the DML’s Lender Group has now demanded full and immediate repayment by DML of all monies (comprising principal repayments, interest and costs). A market release from the Australian Securities Exchange dated 27th February 2015 also stated that “The securities of Discovery Metals Limited will be suspended from quotation immediately, in accordance with Listing Rule 17.3, following the appointment of voluntary administrators”.
Meanwhile following the above announcements DML’s Boseto mine near Maun was immediately closed and workers evacuated off the mine premises. Speaking to The Patriot on Sunday on Friday Botswana Mine Workers Union (BMWU) President Jack Tlhagale said  the union management had travelled to Boseto mine for a scheduled meeting with the mine’s management only to find workers locked outside the mine’s premises under heavy police security.
Upon contacting management, Tlhagale said they were told that the mine has been declared insolvent and hence all its assets have been placed under the care of newly appointed administrators who are currently in Australia. “The mine workers were literally outside the gates and police who we are told were called in to monitor the situation were forcing them off the mine grounds into buses which were waiting to ferry them to Maun,” said Tlhagale.
According to Tlhagale, they are yet to receive any correspondence from the mine regarding the issue. “As far as we are concerned the mine is not closed and we demand an explanation on why our members were chased from work without prior notification,” said Tlhagale. Meanwhile the Ministry of Minerals Water and Energy Spokesperson Potso Thari declined to comment on the issue, referring to DML management, who could not be reached at the time of going to print. DML Country Manager Mokwena Morulane's phone rang unanswered.



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