JOHANNESBURG (miningweekly.com) – JSE-listed copper miner Metorex, which has triggered a better Ruashi debt arrangement after gaining R586-million in clawback support, has entered into a new copper hedge deal that is significantly less onerous than the one from which it will be extricated by the end of June.

The R586-million is initial shareholder support through the clawback will be followed by the rights issue, which is aimed at bringing the total raised to R750-million.

The reviving Metorex is in a far better debt-repayment arrangement as a result of the clawback support enabling it to repay $35-million on its project financing facility.

"The new debt arrangement is far more manageable for us," Metorex CEO Terence Goodlace tells Mining Weekly Online.

Under the new arrangement, repayments reduce from $22-million to $16-million every six months and the company has a debt holiday until January 1, 2011.

Metorex still has 7 800 t of copper that must be delivered into the onerous $3 900/t Ruashi hedge between March and the end of June. Ruashi is in the Democratic Republic of Congo (DRC).

"Then we're into the new era," Goodlace tells Mining Weekly Online.

The company will start delivering into the new 16 200-t hedge at $5 972/t from July and then another enter another 12 000-t hedge deal at between $6 600/t and $7 600/t from July 1, 2011, to June 30, 2012.

"It puts us into the position to start new feasibility work, to continue to strengthen the balance sheet and to set the company up for growth into the future," he adds.

The payment of the $35-million brings the Ruashi debt to $100-million and a put option has been acquired at no cost to keep the 12 000-t hedge price at $6 600/t in the July 2011 to June 2012 period.

Metorex says that the new hedge book mitigates the impact of potential negative movements in the copper price on Ruashi's ability to service its Standard Bank debt.

Metorex made R462-million cash mining profit in the six months to the end of December, which was nine times more than the R47-million of the corresponding period last year.

The margin of profit of 33%, compared with the 8% of last year, was achieved with the onerous hedges in place, which bodes well for future margins.

Goodlace is prioritising the mobilisation of exploration and feasibility work on the Kinsenda, Lubembe and Musonoi copper/cobalt projects, also in the DRC, while simultaneously expecting to keep Ruashi, Chibuluma and Sable production at the levels of the December quarter.

Ruashi, which milled 328 078 t of ore in the December quarter, is reportedly continuing its positive trend, with quarterly copper production having increased by 32,1% to 7 518 t, and cobalt by 21,9%, to 812 t; Chibuluma 138 491 t; and Sable produced 1 270 t of copper.

Goodlace believes that Dilala, with 19,1-million tons of potentially high-grade copper, has the makings of becoming a good mine.

Copper supply continues to be stressed and demand continues to grow.

But becoming a copper play and getting itself out of debt has come at a cost.

Since its recapitalisation programme was activated last year, Metorex has had to dispose of fluorspar and gold assets and refocus the company on base metals.

It is also still in negotiations with Bernard Swanepoel's To The Point on the future of its troubled Consolidated Murchison antimony/gold operation, which Goodlace says the company would prefer to see saved than closed.

To subscribe to Mining Weekly's print magazine email subscriptions@creamermedia.co.za or buy now.