Mawson West Places Kapulo Mine on Care and Maintenance

Mawson West (TSX:MWE) will put its Kapulo  mine in the Democratic Republic of Congo (DRC) on care and maintenance due to weak copper prices. The company will aim to cease mining by the end of March, with million operations to continue into April.
Mawson West acting CEO, Anthony Lloyd, said:

At current prices, the Company is producing at levels insufficient to cover its operational and financial obligations, and is also depleting Kapulo’s short mine life (4 years) to generate little to no free cash flow. The Company has determined that the best course of action is to place the mine on care and maintenance in order to preserve the asset until such time as the price of copper recovers sufficiently to permit profitable mining. Our majority shareholder and secured creditors are in agreement with this course of action and have agreed to arrangements which will permit this to occur. While the financing is quite dilutive and will if approved by minority shareholders likely result in the compulsory acquisition of their interests, the Company requires financing in any event and the alternative would more than likely be insolvency proceedings which would be of uncertain outcome for minority shareholders.

As quoted in the press release:

These circumstances have also contributed to a rapid deterioration in the Company’s financial position, such that it is currently having difficulties satisfying its payables in a timely manner.
In order to satisfy current payables and place the Kapulo mine on care and maintenance, the Company requires financing, and its majority shareholder, Galena Private Equity Resources Fund LP (“Galena”), has agreed to provide Mawson West’s subsidiary, Anvil Mining Congo SA, with an interest free, secured loan for these purposes in an amount up to US$20.0 million (C$27.15 million at current exchange rates) (the “Loan”). In partial consideration for the Loan, the Company has issued Galena warrants exercisable to acquire up to 2,744,200,000 ordinary shares of the Company at an exercise price of C$0.01 per share until December 31, 2017 (the “Warrants”).
The Warrants will be exercisable pro rata based on the amount of the Loan which is drawn down at the time of exercise. The exercise of the Warrants is subject to the receipt of disinterested shareholder approval. Upon receiving shareholder approval for the exercise of the Warrants, which must be obtained prior to May 15, 2016, Galena will be required to exercise the Warrants which are then exercisable within 10 business days and the warrant exercise price payable will be set-off against the Loan.
In addition, the Company’s Prepayment Facility with Trafigura has been amended. Under these amendments, principal and interest payments due under the Prepayment Facility will cease until such time as mining operations at the Kapulo mine are recommenced, following which Trafigura will have priority for repayment of the Prepayment Facility from the first US$15 million of available cashflow from mining operations, in instalment amounts and times to be based on the calculation of available cashflow. The Loan will mature on the date which is six months after which Trafigura has been paid this amount.

Click here for the full press release.