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Cradle Arc in talks for Leboam funds after court places project under judicial management

Cradle Arc has started talks with existing and potential funders to secure the financing needed for Leboam

Cradle Arc
Cradle Arc has a 60% stake in Leboam, the holding company of the Mowana mine

Cradle Arc PLC (LON:CRA) said the Botswana High Court has placed its subsidiary Leboam Holdings under judicial management following a loan dispute.

Cradle Arc owns a 60% stake in Leboam, the holding company of the Mowana copper mine in Botswana.

John Hinchcliffe, a chartered accountant in Botswana, has been appointed as provisional judicial manager to secure and preserve the assets of Leboam and prevent the mismanagement of the project. He will also be responsible for ensuring Leboam is able to meet its obligations and do everything necessary to protect the interests of the members and creditors of the firm. Hinchcliffe will need to file a report on the financial position of Leboam to a meeting of creditors before the High Court by no later than February 18.  

Following the meeting, Leboam will have until February 21 to submit an affidavit or business plan.

READ: Cradle Arc plays for time at Mowana as it seeks a sustainable funding solution

The news follows an impasse in loan negotiations between Fujax Minerals and secured lenders of Leboam.

Fujax and Leboam's 40% shareholder had made an application to the Botswana High Court for Leboam to be placed under judicial management or alternatively, to place it under provisional liquidation.

Cradle Arc had separately applied to put Leboam into provisional liquidation. It was opposing the application for judicial management on the basis that Fujax has neither provided a viable alternative financing plan for Leboam, nor a credible business plan for the Mowana mine.

Cradle Arc in talks with potential funders

The company has now started talks with existing and potential funders to secure the financing needed for Leboam.

Chief executive Kevin van Wouw said Cradle Arc will co-operate with the provisional judicial manager in order to seek the best financing and operational plan for Leboam to resolve the group’s financial difficulties.  

"Following from the impasse between Fujax and the Secured Lenders to the project, where the working capital facility agreed was not completed and which has directly led to this situation, we have commenced discussions with various existing and potential funders in order to attempt to secure a suitable financing solution for the project going forward.

"The company has made significant investment in this project, and as such we will continue to preserve the value where possible by following these processes to their conclusion."

 Cradle Arc said there can be no guarantee that the company will be able to secure the necessary financing in order to support a credible business plan to the Botswana High Court by February 21.

Cradle Arc confident it can secure funds needed to avoid insolvency

The group also needs to raise funds to finance its corporate overheads and general administration costs, as well as to maintain and develop other assets. 

While it is confident it will be able to raise the funds needed, Cradle Arc said it would be highly likely that it would become insolvent if unsuccessful.

Meanwhile, the HMRC is currently looking into the company’s VAT receivables of £546,406 for last year. Cradle Arc is optimistic that repayment of VAT to the company will become due in the “near term”. 

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LSE:CRA
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