AMF advances at Kolwezi

America Mineral Fields‘ (AMZ-T) Kolwezi cobalt-copper tailings project in the Democratic Republic of Congo has taken another step toward become a reality after the government’s Council of Ministers approved the project at a recent cabinet meeting.

Still, the approval is subject to official presentation of the contract of association with the government and state-owned Gcamines (Gnrale des carrires et des mines) to the council. Under the contract, AMF will relinquish a tax holiday for the project in return for a larger equity interest. AMF stands to take an 82.5% interest, with Gcamines owning 12.5% and the government retaining 5%.

The latest approval is also subject to the incorporation of Kingamyambo Musonoi Tailings (KMT), the Congolese operating company that will hold the exploitation permit for the tailings.

AMF figures formal execution of the contract, and the incorporation and transfer of exploitation rights to KMT will take several weeks.

Once the transfer is wrapped up, AMF is required to pay Gcamines US$5 million plus another US$10 million once a bankable feasibility study and project financing have been completed. Gcamines is also entitled to participate in profits generated as a result of higher cobalt prices.

“This is another important step forward in the completion of the Kolwezi transaction and a strong reaffirmation of DRC Governmental support for this important project,” AMF’s president said in a prepared statement.

“The way is now clear to complete the final stages of both the feasibility study and the environmental and social impact assessment, and to seek financing for this world class project,” he added.

Reserves at Kolwezi consist of 112.8 million tonnes of oxide tailings grading 0.32% cobalt and 1.49% copper (T.N.M., Feb. 10-16/03). Of that amount, 42.3 million tonnes exist in a 1.5-km-wide tailings dam; the balance is in an 11-km-long body of tailings discharged into the Musonoi River Valley.

The project is expected to produce 7,000 tonnes cobalt and 42,000 tonnes copper annually over 38 years. Capital costs are pegged at US$335 million.

The DRC’s Economic and Finance Cabinet Sub-committee have already approved the project.

On the financial front, the company has agreed to privately place 3.5 newly minted shares at $1.60 apiece with M & G Investment Managers to raise $5.6 million. AMF will apply to have 3.5 million of the shares admitted for trading on the Alternative Investment Market. The deal is expected to wrap up on Jan. 28.In other news, AMF recently issued a call notice to the holders of warrants issued in May. The company warned that the warrants, exercisable at 75 per share, could be called in if the company’s share price averaged $1.10 or more for 20 consecutive days. In that event the warrants expiry date would be trimmed by about four years to early Feb. 2, 2004.

Of the 4 million warrants originally issued, about 3 million have already been exercise for proceeds of $2.2 million; 700,000 of those warrants were exercised following the call.

Shares in AMF were a nickel, or about 3%, higher at $1.65 in afternoon trading in Toronto on Jan. 15.


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