Cradle Arc PLC (LON:CRA) has cut its 2018 production guidance for its 60%-owned Mowana Copper Mine in Botswana after some operational setbacks during the third-quarter, but expects to ramp-up to full steady state production during the fourth quarter.
The African-focused base and precious metals exploration and production company also announced the proposed appointment of Roy Pitchford, as its non-executive chairman, and Michael Golding, as an additional non-executive director.
It noted that Toby Howell, Cradle Arc's current chairman, has advised the company of his intention “to resign from his position to pursue his other business interests at the appropriate time.”
Kevin van Wouw, CEO of Cradle Arc, commented: "We are very happy to be securing the considerable mining experience of both Roy and Michael, in their respective future roles as Non-Executive Chairman and Non-Executive Director.
“The depth and range of experience brought into the company will bring new understanding of the challenges being experienced as Cradle Arc matures into an established copper producer."
Adverse impacts on drilling operations
In its operational update, Cradle Arc pointed out that In July 2018, drilling operations were adversely impacted for approximately three weeks due to breakdowns and the under-performance of a drilling contractor.
As a result, the lower volume of available ores being delivered to the processing plant, alongside the previously reported sporadic interruptions to processing due to plant outages, resulted in 45,224 tonnes of ore being milled in July 2018, leading to a lower than forecast 292 tonnes of contained copper being produced for the month.
It added that, in mid-August 2018, further intermittent breakdowns have been experienced, which also resulted in further considerable periods of processing downtime.
As a consequence of the further breakdowns experienced and the inherent inefficiencies of such sporadic stoppages at the processing plant, Cradle Arc said the total contained copper production for August 2018 is expected to be broadly in-line with the output achieved for July 2018 and therefore significantly below the company's original expectations, such that the project is not currently breaking even in terms of operational cash flow at the current run rate.
It added that, in light of the operational difficulties experienced in July and August 2018, the company has revised its guidance for expected total contained copper production in the second half of 2018 to 4,000 tonnes, with approximately 1,000 tonnes expected to be produced in the third-quarter and approximately 3,000 tonnes in the fourth quarter.
Significant fourth quarter uplift expected
The group said the anticipated significant quarterly uplift is due primarily to the change in ore types from transitional to supergene expected to be mined during that quarter.
Cradle Arc said it is currently in advanced negotiations in respect of obtaining the financing required for its planned Dense Media Separation (DMS) upgrades.
It added that the envisaged financing package includes an initial tranche of funding which is to be utilised to improve and rehabilitate the current processing facilities and procure an inventory of certain key spare parts, which should then serve to mitigate the occurrences of further processing plant breakdowns and interruptions during the critical ramp-up phase.
The company said it will now focus on developing sufficient space in the mining pits at Mowana to allow the fourth mining unit to commence operations during the fourth quarter of 2018, thereby enabling ramp-up to full steady state production.
The firm said it currently expects to reach the full nameplate processing rate of 1.2mln tonnes of ore per annum at Mowana during the fourth quarter of 2018.
In early morning trading, Cradle Arc shares had dropped 34.5% lower to 2.75p.