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News: Discovery Metals secures US$110M to develop Botswana underground mine

  1. Discovery Metals (ASX:DML) has secured a US$110 million investment from Castlepines Global Equities to enable development of planned underground mining operations at its producing Boseto Copper Operation in northwest Botswana.

    In return, Castlepines will receive a 34% interest in DML’s wholly owned group subsidiary Discovery Copper(Botswana) (Proprietary) Limited, which owns the project.

    Proceeds from the investment will also be used to pay-out an existing US$5 million loan finance facility with Cupric Canyon Capital and negotiate settlement of existing loan finance facility with DML’s secured lending syndicate.

    The investment by Castlepines in DCB will be for a period of 12 years, and will attract a commercially competitive coupon rate (based on preferred equity return / yield basis by Castlepines).

    The annual coupon rate is subject to an annual fixed escalation factor.

    Following the payment of the coupon rate by DCB, all profits of DCB will be distributed pro-rata between DML and Castlepines in accordance with their respective ownership interests in DCB.

    It is intended that the 66% interest held by DML in DCB will be pledged as security to Castlepines during the term of the investment.

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

    In September 2014, the company completed a Definitive Feasibility Study that returned the following key takeaways at US$3.18 per pound copper and US$20 per ounce silver.

    - NPV (10% p.a. discount factor) of US$97 million (US$41 million mining the 2013 Ore Reserves only);
    - IRR of 45% p.a. (41% p.a. mining the 2013 Ore Reserves only);
    - C1 cash cost of US$2.12 per pound, which includes the contractor’s profit and capital investment recoupment (US$2.14 per pound mining 2013 Ore Reserves only);
    - Total capex to first stope ore production of only US$5.9 million (occurs in Q3/FY15);
    - Total capex to first positive cash flow (occurs in Q3/FY17) of US$34.7 million; and
    - Total capex to cash flow payback of US$69.7 million (occurs in Q2/FY19).


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