CRC.L Regulatory News (CRC)

6 Feb 2009 07:00



For immediate release  6 February 2009

Stock Exchange Announcement

 COPPER RESOURCES CORPORATION

Financial and Operating Update

The Board of Copper Resources Corporation (AIM: CRC.L) ("CRC" or the "Company") announces an operating update and that the previously announced project finance loan facility ("Loan Facility") provided to the Company by Metorex Limited ("Metorex") has been increased from US$20 million to US$30 million, primarily in order to fund the working capital needs of the Company's subsidiary, Miniere de Musoshi et Kinsenda SARL ("MMK").

Operating update

As a consequence of the limited cash reserves available to the Company, a number of actions designed to conserve cash and reduce costs have been taken in all areas of the Company's operations. The Company has significantly scaled back the development of the Kinsenda mine on a temporary basis. In this regard, the Company has put on hold the procurement of long lead items of mechanized mining equipment, the development of the ramp decline, conventional room and pillar stoping operations, and construction of the plant.

Increase in Project Finance loan facility

Background to the loan

The Loan Facility, as announced on 30 June 2008, has been in place since the summer and has provided the single source of working capital to the Company in that time. The increase of the Loan Facility by US$10 million was initially agreed on 18 December 2008, and was made available for immediate drawdown notwithstanding that it was subject to further negotiation of the terms of repayment which were finalised on 3 February 2009. 

Summary of the terms of the Loan Facility

The revised terms of the Loan Facility now provide for the repayment date for the funds drawn down, together with accrued interest, in aggregate US$29.5 million (the "Outstanding Amount") to be extended to 15 March 2009, or such earlier date as the Company arranges a refinancing, (the "Repayment Date").

If CRC fails to settle the Outstanding Amount by the Repayment Date, then, within seven days of receiving written notice from Metorex, CRC will be required to issue such number of new CRC common shares as have a value of not less than the Outstanding Amount, priced at the lower of:

In addition, in consideration for the extension of the Loan Facility, the Company has granted to Metorex the right at any time to convert all or part of the Outstanding Amount into CRC shares on the same terms and conditions offered to all participants in any capital raising prior to or following the repayment date.

Related party transaction

The independent director of the Company, Mr Robert Fischer, considers, having consulted with the Company's nominated adviser, Ambrian Partners Limited, that the terms of this increase and the other amendments to the Loan Facility are fair and reasonable insofar as the Company's shareholders are concerned. 

Proposed fundraising

To date, the funds provided by the Loan Facility of approximately US$28.4 million, have been utilised primarily on working capital and the development of the Kinsenda mine, including on the design and engineering of the processing plant. The remaining portion of the Loan Facility of approximately US$1.6 million, which is expected to be drawn down prior to 15 March 2009, is expected to provide further working capital for up to 1 month with careful cash and operational management.

As announced by the Company on 12 December 2008, Metorex considers it inappropriate to continue providing 100% of the funding required for the continued development of the Company's projects. The Company therefore continues to explore various opportunities to raise the funds required for the Company to continue its operations and to repay the loan at the earliest possible time. 

In light of the future working capital needs of CRC, the Board of the Company has resolved to pursue an equity capital raising which will be available for participation by all existing shareholders. Such a fundraising would be likely to be priced to reflect the Company's current financial circumstances. The terms of this proposed fundraising are currently being finalised and a further announcement in this regard will be made in due course.  Should the fundraising not be fully subscribed, Metorex has undertaken to provide minimal funding to CRC for working capital purposes related to maintenance and holding costs, including of the Kinsenda mine and other CRC assets.

AIM Cancellation

Further to the announcement on 12 December 2008, and unconditional on the success of any proposed fundraising, the Board has resolved that it is appropriate to cancel the admission of the Company's common shares to AIM at the earliest opportunity. In this regard, the Board of the Company considers that the costs associated with being a company with its shares traded on AIM are now disproportionate to the benefits of that market, and that the Company's recent share price performance significantly undervalues the Company's business and operations. Subject to shareholder resolution, the cancellation of the common shares from trading on AIM is expected to occur on or around 6 March 2009. A circular to shareholders in this regard will be issued shortly.

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