African Copper Shuts Down Mowana

African Copper (ACU-T, ACU-L) is closing the doors on its Mowana copper mine in Botswana.

In only the latest such story among base metal producers, low prices fuelled by falling demand for copper have created a working capital deficit for African Copper. The company urgently needs US$15 million to meet its working capital needs.

African Copper says it is in negotiations with lenders and that the shutdown will span at least three weeks.

It will try to renegotiate the amount and timing of its obligations coming due, it says.

In its most recent financial statements for the three-month period ending Sept. 30, 2008, the company reported total contractual commitments of $19.7 million. The bulk of that was to go to mining- contract termination and a mining-contract bank guarantee.

For the same period, the company reported current assets of $18.8 million.

Also wounding the copper miner was an impairment charge of 50% or $73 million on the mining project and its related plant and equipment. That writedown came as a result of lower copper prices.

The situation is so dire that African Copper admitted that if it can’t drum up the required financing, it won’t be able to continue as a going concern.

African Copper’s 100%-owned Mowana mine opened in January 2008 and the first shipment of copper concentrate was sent out at the end of October.

But the ramp-up to commercial production was stalled by production delays in the fourth quarter owing to a lack of spare parts, the working capital deficit and unexpected equipment failures.

The delays caused production shortfalls: the company produced only 270 tonnes of copper in concentrate during the quarter, well below its forecast of 1,500 tonnes.

Mowana is located roughly 10 km west of the city of Francistown, in northeastern Botswana.

The mine hosts reserves of 14.8 million tonnes grading 1.11% copper for 361 million lbs. of copper, plus measured and indicated resources of 87.6 million tonnes grading 0.71% copper for 1.4 billion lbs. copper.

In Toronto on the news, the company’s shares finished down 0.5¢ to 2.5¢ on 2.6 million shares traded. African Copper shares have traded between $1.30 and 1¢ over the last 52 weeks, and the company has 147 million shares outstanding.