FOR: AFRICAN COPPER PLC
AIM, TSX SYMBOL: ACU
March 31, 2008
African Copper Plc: Preliminary Results for the Year Ended 31 December 2007
LONDON, UNITED KINGDOM--(Marketwire - March 31, 2008) - AFRICAN COPPER PLC ("African Copper" or the "Company")
(TSX:ACU)(AIM:ACU)(BOTSWANA:AFRICAN COPPER) announces its preliminary results for the year ended 31 December
2007 and its Pula 150 million (Pounds Sterling 11.4 million) unsecured debt financing.
Highlights
Corporate
- The Company recorded a net gain for fiscal 2007 of Pounds Sterling 117,409 (0.09p), compared with a net loss
of Pounds Sterling 2,100,884 (2.20p) in fiscal 2006. Higher bank interest receivable and foreign exchange gains
more than offset higher corporate costs and Botswana administration costs contributing to the net gain in
fiscal 2007.
- Raised Pula 150 million (Pounds Sterling 11.4 million) - On 28 March 2008, Messina Copper (Botswana) (Pty)
Ltd ("Messina"), African Copper's 100% owned subsidiary, received binding subscription agreements as part of a
Pula 200 million Botswana Note Programme for Pula 150 million (Pounds Sterling 11.4 million) notes from local
Botswana institutions (the "Botswana Bond"). The Botswana Bond is denominated in Pula and is an unsecured fixed
rate note that bears interest at 14.0% per annum and has a bullet maturity in 7 years.
- Signed a concentrate sale and purchase agreement (the "Off-take Agreement") with MRI Trading AG ("MRI") for
100% of all copper products shipped from the Mowana Mine. The Off-take Agreement has a duration of 5 years and
is renewable. In conjunction with the Off-take Agreement, MRI subscribed for 7,284,000 ordinary shares of the
Company for net proceeds of Pounds Sterling 5 million.
Mowana Project Development
- Signed a five-year contract with Moolman Mining Botswana (Pty) Ltd.
- Mining Activities - Mining commenced in July 2007 with the removal of free-digging loose material from the
open-pit area. By the end of 2007, the full fleet of face-loading shovels had arrived on-site and these were
commissioned in January 2008. Even with the heavy rains experienced in January 2008 pre-stripping was
maintained close to schedule and blasting in the pit and stockpiling of ore had commenced by the end of January
2008. At the end of March 2008, the stockpiles at Mowana consisted of about 200,000 tonnes of material at 0.9%
copper, including about 33,000 tonnes grading 1.8% copper on the high grade stockpile.
- Strengthened the management and operating team - by the end of 2007, all senior positions had been filled.
The technical and operational team in Botswana has grown from 22 as at the end of 2006 to over 50 at the end of
2007 and currently numbers 77. Recruitment of junior level staff is on-going. The Company expects to have
approximately 175 employees when the Mowana Mine goes into production in the second quarter of 2008.
- Capital Costs - have been kept within the revised budgets presented in November 2007. The estimated 8%
increase in capital over the 2006 budget estimate was composed of intentional design changes to the crushing
circuit (4.5%) and to cost escalation that is being experienced throughout the industry.
- Construction Activities - As of the end of February 2008, construction of surface facilities was about 90%
complete.
- Start-up - Commissioning of the mechanical portions of the plant commenced in late March 2008 and should
culminate in the hot commissioning of the primary crusher in May 2008. The Company expects to be shipping
concentrate in June or July of this year. Completion of construction activities on site is expected in July
2008 with a hand-over from EPCM teams to operational teams. Commercial production should be declared in the
third quarter of 2008.
- Growing Production at Mowana - Metallurgical studies were also conducted to optimise process design and
recoveries, and explore the benefits of a Dense Media Separation plant. At the conclusion of these studies, the
Company released its open-pit production profile in February 2008 (see press release 25 February 2008) for the
first five years of mining at the Mowana mine. The resultant production estimates show a five-fold increase in
annual copper production from 5,500 tonnes in 2008 to 29,000 tonnes in 2012. Once the operation is treating
predominately sulphide ores cash costs are expected to be around US$1.49 per pound.
- Expanded Reserves and Resource - the RSV Technical Report issued in November 2007 confirmed about 87.7
million tonnes of measured and indicated resources at 0.71% copper of which approximately 14.8 million tonnes
had been converted into proven and probable reserves at 1.1% copper.
- Underground Development - In 2007 a pre-feasibility study was commissioned to investigate the viability of an
underground mine. DMS studies completed during 2007 showed that it would be possible to use bulk mining methods
underground to extract mineralization and that this material could be upgraded prior to the introduction into
the ball mill and flotation circuits. A complete mine layout was developed in late 2007 which encompassed multi-
level development over the entire 2 kilometre strike extent of the known mineralization at Mowana to a depth of
850 metres.
- Exploration at Matsitama Belt - the Company published a resource estimate for the Thakadu mineralization of
4.7 million tonnes of 1.72% copper and 3,558 tonnes of silver grading 16 grams/tonne. In addition, African
Copper has identified four high priority areas for further exploration in 2008 - The Gaokae nickel-PGM anomaly,
Nakalakwana Hill copper-gold targets, Phute copper anomaly and the 75-kilometre Lepashe Snake copper anomaly.
Results in 2007 were hindered by excessively long turnaround times for sample analysis.
The Chairman of African Copper, Roy Corrans said, "The Board is delighted with the support that we have
received from Botswana based shareholders and investors throughout 2007 and into early 2008. The response and
the financial support shown by Botswana institutions and the Botswana Stock Exchange have been unequalled. The
Board remains confident that the Company development objectives are achievable in 2008 and believes that the
share price will respond positively as we meet our corporate goals throughout the balance of 2008."
Full details of the foregoing are contained in the Company's Management's Discussion and Analysis ("MD&A") for
the year ended 31 December 2007 attached hereto. The Audited Financial Statements for the year ended 31
December 2007 and the Company's Annual Information Form is available at www.africancopper.com or under the
Company's profile on SEDAR at www.sedar.com.
A conference call will be held on April 1, 2008 at 8 a.m. EST or 1 pm London time. To join us by telephone,
please dial 416-695-9753 five minutes prior to the start time. Toll free numbers are available for North
American callers at 1-888-789-0150 and UK callers at (00)-800-4222-8835. In addition, it is possible to listen
to the teleconference and view the slide presentation from our website http://www.africancopper.com in the
Investors/Conference Calls.
FORWARD-LOOKING STATEMENTS
This press release contains "forward-looking information". Forward-looking information includes, but is not
limited to, statements concerning mineral resource estimates, information with respect to the future price of
copper, bank interest receivables, the exploration budget for Matsitama, results of mining operations, mining
extraction and recovery rates at the Mowana Mine Project, estimates of production of copper at the Mowana Mine
Project, including the anticipated production profile for the first five years of mining, the potential for
future expansion of the Mowana Mine Project, estimations of the life of the Mowana Mine Project, the expected
levels of ore on the stockpiles at the Mowana Mine Project, expected timing of the commissioning of the process
plant, the expected success of exploration activities under the open pit at the Mowana Mine Project and in the
Matsitama Belt, use of Mineral Resources underground at the Mowana Mine Project to supplement open-pit feed,
the merit of an underground mine at the Mowana Mine Project, Botswana's energy self-sufficiency, the potential
of the Thakadu deposits, government regulation of mining operations and exploration, availability of working
capital facility and project finance for the underground project at the Mowana Mine Project, expected number of
employees and staff at the time of commercial production, expectations concerning the timing of concentrate,
the timing of the completion of construction at the Mowana Mine project and hand-over from EPCM teams to
operational teams, plans concerning the evaluation of mineral resource potential to the south of the open pit
at the Mowana Mine Project, the use of derivative positions and the impact of exchange rates and other
statements which are not historical facts.
In certain cases, forward-looking information can be identified by the use of words such as "plans", "expects"
or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates"
or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions,
events or results "may", "could", "would", "should", "might" or "will be taken", "occur" or "be achieved" and
include the negative variation of such phrases.
With respect to forward-looking information contained in this press release, the Company has made assumptions
regarding, among other things, the Company's ability to generate sufficient cash flow from operations and
access existing credit facilities and capital markets to meet its future obligations, the regulatory framework
in Botswana with respect to, among other things, permits, licenses, authorizations, royalties, taxes and
environmental matters, and the Company's ability to obtain qualified staff and equipment in a timely and cost-
efficient manner to meet the Company's demand.
Although the Company believes that its expectations reflected in forward-looking information are reasonable,
such forward-looking information involves known and unknown risks, uncertainties and other factors that may
cause the actual results, performance or achievements of the Company or the Company's projects in Botswana, or
any of them, to be materially different from any future results, performance or achievements expressed or
implied by the forward-looking information. Such factors include, risks related to failure to convert estimated
mineral resources to reserves, conclusions of economic evaluations, changes in project parameters as plans
continue to be refined, future prices of copper, unexpected increases in capital or operating costs, possible
variations in mineral resources, grade or recovery rates, failure of equipment or processes to operate as
anticipated, accidents, labour disputes and other risks of the mining industry, delays in obtaining
governmental consents, permits, licences and registrations or financing or in the completion of development or
construction activities, political risks arising from operating in Africa, uncertainties relating to the
availability and costs and availability of financing needed in the future, changes in equity markets,
inflation, changes in exchange rates, fluctuations in commodity prices and uninsured risks, as well as those
factors discussed under "Risks" in the MD&A.
Although the Company has attempted to identify important factors that could cause actual actions, events or
results to differ materially from those described in forward-looking information, there may be other factors
that cause actions, events or results not to be as anticipated, estimated or intended. There can be no
assurance that forward-looking information will prove to be accurate, as actual results and future events could
differ materially from those anticipated in such information. Accordingly, readers should not place undue
reliance on forward-looking information. The forward-looking information contained herein, unless stated
otherwise, is made as of the date of this press release and the Company makes no responsibility to update them
or to revise them to reflect new events or circumstances, except as required by law.
The mineral resource and mineral reserve figures referred to in this press release are estimates and no
assurances can be given that the indicated levels of minerals will be produced. Such estimates are expressions
of judgment based on knowledge, mining experience, analysis of drilling results and industry practices. Valid
estimates made at a given time may significantly change when new information becomes available. While the
Company believes that the resource and reserve estimates referred to in this press release are well
established, by their nature resource and reserve estimates are imprecise and depend, to a certain extent, upon
statistical inferences which may ultimately prove unreliable. If such estimates are inaccurate or are reduced
in the future, this could have a material adverse impact on the Company. Due to the uncertainty that may be
attached to inferred mineral resources, it cannot be assumed that all or any part of an inferred mineral
resource will be upgraded to an indicated or measured mineral resource as a result of continued exploration.
Chairman's Statement
Dear Shareholders,
The 2007 fiscal year marked the transformation of our Company from a junior explorer to a near-term producer of
copper. Very few companies make this quantum leap in viability in the mineral exploration industry. This
achievement is a tribute to the dedication and hard work of the talented employees at African Copper who
continue to work tirelessly to achieve the aggressive goals that were set for them at the end of 2006.
African Copper was incorporated in early 2004 and admitted for trading on AIM in mid-November of that year.
We're very proud of what we have achieved in three short years. In 2004, the Mowana mineralization totalled
about 6 million tonnes of indicated mineralization. By the end of 2007, the Company had confirmed about 87
million tonnes of measured and indicated resources at 0.71% copper of which approximately 14 million tonnes had
been converted into proven and probable reserves at 1.1% copper. In addition, African Copper had completed
sufficient engineering to determine the best processing route for the mineralization, raised sufficient capital
to enable construction to commence production, entered into EPCM contracts, obtained all required permits,
commenced mining at the operations, signed a five-year offtake agreement and successfully recruited all senior
Section Managers for the eventual mine. I believe that these achievements are unique in the industry.
While the open pit mineralization is the immediate source of revenue for the Company, the Board remains excited
about the possibility of an underground mine at Mowana. Engineering studies for this important expansion are
well advanced and I look forward to sharing the results of these studies with our shareholders in the second
quarter of 2008. The extraction of deeper mineralization provides longevity for the operations beyond the 7
years represented by the open pit, and should place Mowana firmly on the path to becoming one of Botswana's new
mines.
The Board is delighted with the support that we have received from Botswana based shareholders and investors
throughout 2007 and into early 2008. The response and the financial support shown by Botswana institutions and
the Botswana Stock Exchange have been unequalled. The Board remains confident that the Company development
objectives are achievable in 2008 and believes that the share price will respond positively as we meet our
corporate goals throughout the balance of 2008.
As African Copper moves into production the Board will continue to grow shareholder value and to sensibly
leverage the resources that shareholders have entrusted to us. The Company will be aggressive in pursuing both
exploration and acquisition opportunities while remaining cognizant of market conditions and shareholder
interests. As a shareholder, you can be assured that the Board will protect your interests, will push
management to achieve ever greater goals, will require the Company to develop projects in a sensible and
environmentally sustainable manner, and will ensure the engagement of communities and stakeholders at all
stages.
On behalf of the Board, I would like to thank the shareholders and employees of African Copper for their
support and loyalty in 2007. I would also like to thank my fellow Directors for their active participation and
contributions to the Company in its transition year. I expect that 2008 will be an exciting year for the
Company, and for our shareholders.
ROY CORRANS, Chairman
30 March 2008
African Copper Plc
Consolidated income statement
/T/
----------------------------------------------------------------------------
Year ended 31 December
2007 2006
Pounds Sterling Pounds Sterling
'000 '000
----------------------------------------------------------------------------
Administrative expenses (2,738) (1,581)
Loss on derivative financial instruments (406) -
Exchange gain/(loss) 276 (2,103)
----------------------------------------------------------------------------
Operating loss (2,868) (3,684)
Finance income
Bank interest receivable 2,985 1,646
----------------------------------------------------------------------------
Profit/(loss) before tax 117 (2,038)
Tax - (62)
----------------------------------------------------------------------------
Profit/(loss) after tax 117 (2,100)
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Basic earnings/(loss) per ordinary share 0.09p (2.20)p
Diluted earnings/(loss) per ordinary share 0.09p (2.20)p
African Copper Plc
Balance Sheets
--------------------------------------------------------------------------
Group Company
As at 31 December As at 31 December
2007 2006 2007 2006
Pounds Pounds Pounds Pounds
Sterling Sterling Sterling Sterling
'000 '000 '000 '000
--------------------------------------------------------------------------
ASSETS
Property, plant and equipment 48,248 13,964 1,171 1,043
Deferred exploration costs 4,322 2,007 84 -
Other financial assets 4,167 - - -
Long term receivables - - 6,826 16,986
Investments in subsidiaries - - 57,209 9,496
--------------------------------------------------------------------------
Total non-current assets 56,737 15,971 65,290 27,525
--------------------------------------------------------------------------
Other receivables and prepayments 1,903 648 100 438
Derivative financial assets 1,841 - 1,841 -
Cash and cash equivalents 22,428 53,254 18,840 51,157
--------------------------------------------------------------------------
Total current assets 26,172 53,902 20,781 51,595
--------------------------------------------------------------------------
Total assets 82,909 69,873 86,071 79,120
--------------------------------------------------------------------------
--------------------------------------------------------------------------
EQUITY
Issued share capital 1,396 1,305 1,396 1,305
Share premium 76,947 69,844 76,947 69,844
Merger reserve - - 8,607 8,607
Acquisition reserve 4,485 4,485 - -
Foreign currency translation reserve (1,207) (1,979) - -
Hedging reserves (812) - (812) -
Retained losses (4,843) (5,687) (329) (829)
--------------------------------------------------------------------------
Total equity 75,966 67,968 85,809 78,927
--------------------------------------------------------------------------
LIABILITIES
Asset retirement obligation 464 - - -
--------------------------------------------------------------------------
Total non-current liabilities 464 - - -
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Trade and other payables 6,479 1,905 262 193
--------------------------------------------------------------------------
Total current liabilities 6,479 1,905 262 193
--------------------------------------------------------------------------
Total equity and liabilities 82,909 69,873 86,071 79,120
--------------------------------------------------------------------------
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African Copper Plc
Group consolidated statement of changes in shareholders' equity
----------------------------------------------------------------------------
Foreign
Currency
Acqui- Trans-
Share Share sition lation Hedging Retained Total
Capital Premium Reserve Reserve Reserve Loss Equity
Pounds Pounds Pounds Pounds Pounds Pounds Pounds
Sterling Sterling Sterling Sterling Sterling Sterling Sterling
'000 '000 '000 '000 '000 '000 '000
----------------------------------------------------------------------------
Balance at 1
January 2006 520 16,158 4,485 (315) - (4,579) 16,269
Foreign
exchange
adjustments - - - (1,664) - - (1,664)
----------------------------------------------------------------------------
Total
recognized
income and
expense
recognized
directly
in equity - - - (1,664) - - (1,664)
----------------------------------------------------------------------------
Loss for
the year - - - - - (2,100) (2,100)
----------------------------------------------------------------------------
Total
recognised
loss for
the year - - - (1,664) - (2,100) (3,764)
New share
capital
subscribed 785 58,702 - - - - 59,487
Share issue
costs - (5,016) - - - - (5,016)
Credit
arising
on share
options - - - - - 992 992
----------------------------------------------------------------------------
Balance
at 31
December
2006 1,305 69,844 4,485 (1,979) - (5,687) 67,968
----------------------------------------------------------------------------
Foreign
exchange
adjustments - - - 772 - - 772
Fair value
loss on
cash flow
hedge
instruments - - - - (812) (812)
----------------------------------------------------------------------------
Total
recognized
income and
expense
recognized
directly
in equity - - - 772 (812) - (40)
----------------------------------------------------------------------------
Gain for
the year - - - - - 117 117
----------------------------------------------------------------------------
Total
recognised
gain/(loss)
for the
year - - - 772 (812) 117 76
New share
capital
subscribed 91 7,509 - - - - 7,600
Share issue
costs - (406) - - - - (406)
Credit arising
on share
options - - - - - 727 727
----------------------------------------------------------------------------
Balance at 31
December 2007 1,396 76,947 4,485 (1,207) (812) (4,843) 75,966
----------------------------------------------------------------------------
----------------------------------------------------------------------------
African Copper Plc
Group consolidated cash flow statement
----------------------------------------------------------------------------
Year ended 31 December
2007 2006
Pounds Sterling Pounds Sterling
'000 '000
----------------------------------------------------------------------------
Cash flows from operating activities
Administration expenses (2,738) (1,581)
Tax - (62)
----------------------------------------------------------------------------
Operating loss from continuing
operations (2,738) (1,643)
Increase in receivables (1,255) (421)
Increase/(decrease) in payables 69 (5)
Share based payment expense 519 562
Tax - 62
----------------------------------------------------------------------------
Cash used in operating activities (3,405) (1,445)
Interest received 2,986 1,646
----------------------------------------------------------------------------
Net cash (outflow)/inflow from operating
activities (419) 201
----------------------------------------------------------------------------
Cash flows from investing activities
Payments to acquire property, plant and
equipment (28,335) (3,805)
Payments of deferred exploration
expenditures (2,315) (6,186)
Purchase of cash flow hedging
instruments (3,060) -
Cash placed on restricted deposit (4,167) -
----------------------------------------------------------------------------
Net cash outflow from investing
activities (37,877) (9,991)
----------------------------------------------------------------------------
Cash flows from financing activities
Issue of equity share capital, net of
issue costs 7,030 52,948
Issue of equity upon exercise of
warrants - 1,378
Issue of equity upon exercise of options 164 145
----------------------------------------------------------------------------
Net cash inflow from financing
activities 7,194 54,471
----------------------------------------------------------------------------
Net (decrease)/increase in cash and cash
equivalents (31,102) 44,681
Cash and cash equivalents at beginning
of the year 53,254 10,676
Exchange gain/(loss) 276 (2,103)
----------------------------------------------------------------------------
Cash and cash equivalents at end of the
year 22,428 53,254
----------------------------------------------------------------------------
----------------------------------------------------------------------------
/T/
1. Nature of operations, going concern and adequacy of project finance
African Copper Plc ("African Copper" or the "Company") is a public limited company incorporated and domiciled
in England and is listed on the AIM market of the London Stock Exchange, the Toronto Stock Exchange and the
Botswana Stock Exchange. African Copper is a holding company of a mineral exploration and development group of
companies (the "Group"). The Group is involved in the exploration and development of copper deposits in
Botswana and is currently developing its first copper mine at the Mowana Mine") and is conducting an
exploration programme at the Matsitama Project. The Mowana Mine is located in the northeastern portion of
Botswana and the Matsitama Project is contiguous to the southern boundary of the Mowana Mine.
On 28 March 2008, Messina Copper (Botswana) (Pty) Ltd ("Messina"), African Copper's 100% owned subsidiary,
received binding subscription agreements as part of a BWP200 million Botswana Note Programme for BWP150.0
million (Pounds Sterling 11.4 million) notes from local Botswana institutions (the "Botswana Bond"). The
Botswana Bond is denominated in Pula and is an unsecured fixed rate note that bears interest at 14.0% per annum
and has a bullet maturity in 7 years. The company has also raised approximately Pounds Sterling 5million in
additional equity since the year end. In addition, to provide the Company with additional operational
flexibility management is in advanced discussions with several financial institutions regarding the
establishment of a revolving working capital and hedging facility for the Mowana Mine.
The Board has reviewed the detailed financial mine plan and consider that with the additional financial
resources secured and the nearness of anticipated production, the Company has sufficient financial resources to
commence production at the Mowana Mine and adequate working capital for the foreseeable future, being a period
of not less than twelve months from the date of signing these financial statements. In the event of operational
cost overruns or delays, they believe the Company has adequate flexibility to manage expenditures. The
Directors therefore consider it appropriate to prepare these financial statements on a going concern basis.
As more fully explained in Management's Discussion and Analysis management intend to complete development of
the open pit mining operations with the addition of a DMS plant to the processing plant, further evaluate
developing the underground portion of the mine at Mowana and continue with the Matsitama exploration project.
Further project finance may be required to complete these and if the Company is unable to secure the further
finance required, the Company may not be able to fully develop these projects and their carrying values and the
investment of the parent company may become impaired.
The address of African Copper's registered office is 100 Pall Mall, St James's London SW1Y 5HP. These
consolidated financial statements have been approved for issue by the Board of Directors on 30 March 2008.
Statutory Accounts
The financial information set out in this preliminary announcement does not constitute statutory accounts
within the meaning of Section 240 of the Companies Act 1985 for the year ended 31 December 2007 or for the year
ended 31 December 2006 but is derived from those accounts. The accounts for the year to 31 December 2006, which
include an unqualified audit report, have been delivered to the Registrar of Companies. The financial
statements for 31 December 2007 will be delivered to the Registrar of Companies following the Company's Annual
General Meeting. The auditors have reported on these accounts. Their report is unqualified and does not contain
statements under section 237 of the Companies Act 1985 An emphasis of matter paragraph is included in their
audit report regarding the issue of the availability of project finance.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set
out below.
a) Statement of Compliance
The consolidated financial statements of African Copper plc have been prepared in accordance with IFRSs and
their interpretations adopted by the International Accounting Standards Board (IASB), as adopted by the
European Union and with IFRSs and their interpretations adopted by the International Accounting Standards Board
(IASB). They have also been prepared in accordance with those parts of the Companies Act 1985 applicable to
companies reporting under IFRSs.
The accounting policies set out below have been applied consistently to all periods presented in these
consolidated financial statements.
As permitted by section 230 of the Companies Act 1985, the income statement of the Company has not been
presented in these financial statements.
b) Basis of preparation
The consolidated financial statements of African Copper are presented in Pounds Sterling and have been prepared
on the historical cost basis or the fair value basis for certain financial instruments.
c) Basis of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the financial statements of the Company and entities
controlled by the Company (its subsidiaries) made up to 31 December each year. Control is recognized where the
Company has the power to govern the financial and operating policies of an investee entity so as to obtain
benefits from its activities.
(ii) Transactions eliminated on consolidation
Intra-group transactions, balances and unrealized gains on transactions between group companies are eliminated.
Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no
evidence of impairment.
(iii) Business combinations
On entering into a business combination, an acquirer is identified based on the identity of the entity which
gains control of the combining entities.
The assets, liabilities and contingent liabilities of the acquiree are measured at their fair value at the date
of acquisition. Any excess of the fair value of the consideration paid over the fair value of the identifiable
net assets acquired is recognised as goodwill. If the fair value of the consideration is less than the fair
value of the identifiable net assets acquired, the difference is recognised directly in the income statement.
d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group's entities are measured using the currency of
the primary economic environment in which the entity operates ('the functional currency'). The consolidated
financial statements are presented in Pounds Sterling, which is the Group's presentation currency and the
functional currency of the Company.
(ii) Group companies
The results and financial position of all the group entities (none of which has the currency of a
hyperinflationary economy) that have a functional currency different from the presentation currency are
translated into the presentation currency as follows:
- assets and liabilities for each balance sheet presented are translated at the closing rate at the date of
that balance sheet;
- income and expenses for each income statement are translated at average exchange rates (unless this average
is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in
which case income and expenses are translated at the dates of the transactions); and
- all resulting exchange differences are recognized as a separate component of equity.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations
are taken to shareholders' equity. When a foreign operation is sold, exchange differences that were recorded in
equity are recognized in the income statement as part of the gain or loss on sale.
e) Property, plant and equipment
Property, plant and equipment are recorded at cost less accumulated amortisation and less any accumulated
impairment losses. Pre-production expenditure relating to testing and commissioning is capitalised to property,
plant and equipment. The recognition of costs in the carrying amount of an asset ceases when the item is in the
location and condition necessary to operate as intended by management. Any net income earned while the item is
not yet capable of operating as intended reduces the capitalised amount. Interest on borrowings, specifically
to finance the establishment of mining assets, is capitalised during the construction phase.
Subsequent costs are included in the asset's carrying amount only when it is probable that future economic
benefits associated with the item will flow to the group and the cost of the item can be reliably measured. All
other repairs and maintenance are charged to the income statement during the financial period in which they are
incurred.
Amortization methods and amortization rates are applied consistently within each asset class except where
significant individual assets have been identified which have different amortisation patterns. Residual values
are reviewed at least annually. Amortisation is not adjusted retrospectively for changes in the residual
amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount and are
included in the income statement.
Other assets consist of vehicles, information technology equipment and furniture and equipment.
Mining development and infrastructure
Individual mining assets and deferred stripping costs are amortised using the units-of-production method based
on the estimated economically recoverable metal during the life of mine plan. Mining costs incurred on
development activities comprising the removal of waste rock to initially expose ore at the Mowana open pit
mine, commonly referred to as "deferred stripping costs," are capitalized.
Mining plant and equipment
Individual mining plant and equipment assets are depreciated using the straight line method over the useful
life of the asset once the assets are available for use.
Other Assets
These assets are depreciated using the straight line method over the useful life of the asset as follows:
/T/
- Vehicles 4 years
- Information technology 3 years
- Furniture & equipment 5 years
/T/
f) Deferred exploration and evaluation
All costs incurred prior to obtaining the legal right to undertake exploration and evaluation activities on a
project are written-off as incurred.
Exploration and evaluation costs arising following the acquisition of an exploration licence are capitalized on
project-by-project basis, pending determination of the technical feasibility and commercial viability of the
project. Costs incurred include appropriate technical and administrative overheads. Deferred exploration costs
are carried at historical cost less any impairment losses recognised.
Upon demonstration of the technical and commercial feasibility of a project, any past deferred exploration and
evaluation costs related to that project will be reclassified as Mine Development and Infrastructure.
Capitalised deferred exploration expenditures are reviewed for impairment losses (see accounting policy note
below) at each balance sheet date. In the case of undeveloped properties, there may be only inferred resources
to form a basis for the impairment review. The review is based on a status report regarding the Group's
intentions for development of the undeveloped property.
The recoverability of deferred exploration and evaluation costs is dependent upon the discovery of economically
recoverable ore reserves, the ability of the Group to obtain the necessary financing to complete the
development of the reserves and future profitable production or proceeds from the disposal
thereof.
g) Other receivables and prepayments
Other receivables and prepayments are not interest bearing and are stated at amortised cost.
h) Derivative financial instruments
Copper forward exchange contracts are entered into to hedge anticipated future transactions. Derivative
financial instruments are initially recognised in the balance sheet at the fair value on the date of
acquisition and subsequently remeasured at fair value. The method of recognising the resulting gain or loss is
dependant on the nature of the item being hedged. On the date that the derivative contract is entered into, the
group designates derivatives as either a hedge of the fair value of a recognised asset or liability (fair value
hedge) or a hedge of a forecasted transaction or a firm commitment (cash flow hedge). Changes in the fair value
of derivatives that are designated and qualify as cash flow hedges and that are highly effective are recognised
in equity. Changes in the fair value of derivatives that are designated as fair value hedges are recognised in
the income statement. Certain derivative transactions, while providing effective economic hedges under group's
risk management policies, do not qualify for hedge accounting. Changes in the fair value of any such derivative
instruments are recognised immediately in the income statement.
i) Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly
liquid investments with original maturities of three months or less.
j) Impairment
Whenever events or changes in circumstance indicate that the carrying amount of an asset may not be recoverable
an asset is reviewed for impairment. An asset's carrying value is written down to its estimated recoverable
amount (being the higher of the fair value less costs to sell and value in use) if that is less than the
asset's carrying amount.
Impairment reviews for deferred exploration and evaluation costs are carried out on a project by project basis,
with each project representing a potential single cash generating unit. An impairment review is undertaken when
indicators of impairment arise but typically when one of the following circumstances apply:
(i) unexpected geological occurrences that render the resource uneconomic;
(ii) title to the asset is compromised;
(iii) variations in metal prices that render the project uneconomic; and
(iv) variations in the currency of operation.
k) Share based payment
Certain Group employees and consultants are rewarded with share based instruments. These are stated at fair
value at the date of grant and either expensed to the income statement or capitalized to deferred exploration
costs, based on the activity of the employee or consultant, over the vesting period of the instrument.
Fair value is estimated using the Black-Scholes valuation model. The estimated life of the instrument used in
the model is adjusted for management's best estimate of the effects of non-transferability, exercise
restrictions and behavioural considerations.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal
value) and share premium when the options are exercised.
l) Provisions
Provisions are recognized when, the Group has a legal or constructive obligation as a result of past events, it
is more likely than not that an outflow of the resources will be required to settle the obligation and the
amount can be reliably estimated.
m) Trade and other payables
Trade and other payables are not interest bearing and are stated at amortized cost.
n) Income tax
The charge for taxation is based on the profit or loss for the year and takes into account deferred tax.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of
assets and liabilities in the financial statements and the corresponding tax bases used in the computation of
taxable profit or loss, and is accounted for using the balance sheet method.
Deferred tax assets are only recognised to the extent that it is probable that future taxable profit will be
available in the foreseeable future against which the temporary differences can be utilised.
o) Asset retirement obligations
Asset retirement obligations are future costs to retire an asset including dismantling, remediation and ongoing
treatment and monitoring of the site. The asset retirement cost is capitalised as part of the asset's carrying
value and amortized over the asset's useful life. Subsequent to the initial recognition of the asset retirement
obligation and associated asset retirement cost and changes resulting from a revision to either timing or the
amount estimated, cash flows are prospectively reflected in the year those estimates change. The liability is
accreted over time through period charges to the Consolidated Income Statement.
p) Investment in subsidiaries
Investments in subsidiaries are recognised at cost less any provision for impairment.
q) Revenue
i) Interest income
Interest income is recognised as it accrues to the Company.
r) Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances. Many of the
amounts included in the financial statements involve the use of judgement and/or estimation. These judgements
and estimates are based on managements' best knowledge of the relevant facts and circumstances, having regard
to prior experience, but actual results may differ from the amounts included in the financial statements.
Information about such judgements and estimation is contained in the accounting policies and/or the Notes to
the financial statements, and the key areas are summarised below. Areas of judgement that have the most
significant effect on the amounts recognized in the financial statements:
Capitalisation and impairment of exploration and evaluation costs - Note 2(j) and Note 9
Estimation of share based compensation amounts - Note 2(k) and Note 18
Estimation of derivative financial assets - Note 2(h) and Note 11
s) Adoption of International Financial Reporting Standards
The financial statements are prepared in accordance with International Reporting Standards and Interpretations
in force at the reporting date. The Group has not adopted any standards or interpretations in advance of the
required implementation dates. It is not expected that adoption of standards or interpretations which have been
issued by the International Accounting Standards Board, but have not been adopted will have a material impact
on the financial statements.
During the year, the Group applied IFRS 7, "Financial instruments: disclosure" and the capital management
disclosures of IAS 1 (Revised) "Presentation of financial statements" for the first time. The disclosures
required by these standards are set out in note 23. There was no other effect from the adoption of these
standards.
3. Basic and diluted earnings/(loss) per share
The calculation of basic gain per ordinary share on the net basis is based on the profit on ordinary activities
after taxation of Pounds Sterling 117,409 (2006: loss of Pounds Sterling 2,100,884) and on 135,371,319 (2006:
95,516,505) ordinary shares being the weighted average number of ordinary shares in issue and ranking for
dividend during the year. During 2006 no diluted loss per share was presented as the effect of the exercise of
share options would be to decrease the loss per share. During 2007 the calculation of diluted gain per ordinary
share on the net basis is based on the gain of ordinary activities after taxation of Pounds Sterling 117,409
and on 135,640,296 ordinary shares derived as follows:
/T/
Basic number of shares 135,371,319
Effect of dilutive share options 268,977
----------------------------------------------------------------------------
Diluted number of shares 135,640,296
----------------------------------------------------------------------------
----------------------------------------------------------------------------
/T/
MANAGEMENT'S DISCUSSION AND ANALYSIS
For the Year Ended 31 December 2007
The following management discussion and analysis ("MD&A") of the operating results and financial condition of
African Copper Plc ("African Copper" or the "Company") and its subsidiaries is for the year ended 31 December
2007 compared with 31 December 2006. The MD&A should be read in conjunction with the 31 December 2007 audited
consolidated financial statements of the Company (the "Financial Statements") and the related notes thereto
(the "Notes"). The Financial Statements have been prepared under the historical cost convention and in
accordance with International Financial Reporting Standards ("IFRS") (see Note 2: Principal Accounting
Policies). All amounts herein are expressed in British Pound Sterling unless otherwise indicated and the
information is current to 30 March 2008.
Additional information relating to the Company, including the Company's Annual Information Form, is available
at www.africancopper.com or under the Company's profile on SEDAR at www.sedar.com.
The scientific and technical information in this MD&A has been prepared under the supervision of Mr. Joseph
Hamilton, P. Geo., the Company's Chief Executive Officer and a "qualified person" as defined by Canadian
National Instrument 43-101.
BUSINESS OVERVIEW AND STRATEGY
African Copper is an international exploration and development company. At its Mowana Mine Property in
Botswana, total open pit proven and probable reserves have been estimated at 14.8 million tonnes grading 1.11%
copper. Construction of the project began in 2006 and significant progress was made in 2007. Production is
scheduled to commence in the second quarter of 2008, which will transition African Copper from a junior
exploration company to a copper producer. The Company also has a 100% interest in the Matsitama exploration
concession, which has ten high priority drill-ready and 35 lower priority targets.
The Company is incorporated in England and Wales, and its ordinary shares are tri-listed on the AIM market of
the London Stock Exchange, the Toronto Stock Exchange ("TSX") and the Botswana Stock Exchange ("BSX"). The
ordinary shares trade on AIM and the TSX under the symbol "ACU", and on the BSX under the symbol "African
Copper".
The Company's strategy is to grow as a base metal mining company and to provide above average returns to
shareholders. Production at Mowana is expected to grow from an estimated 5,500 tonnes of copper in 2008 to an
estimated 29,000 tonnes in 2012. Mowana has an estimated seven-year mine life in the open pit and it offers
African Copper near-term production, with the potential for future expansion. African Copper intends to exploit
this reserve while continuing to pursue exploration potential around and under the open pit, and in the
Matsitama Belt.
The Company has a large land position in a favourable geological setting, which is relatively under explored at
depth and laterally. There are three areas where exploration is being focused:
1. Near the Mowana Mine - a recent drill programme established mineralization south of the open pit.
2. Underground at Mowana - at this time over 70% of the known estimated Mineral Resource base at Mowana lies
outside of the open-pit boundary. This deeper predominantly sulphide mineralization may potentially be used to
supplement open-pit feed but must be extracted by underground methods.
3. In the 3000 km2 Matsitama Belt, the Company has 10 drill-ready and highly prospective targets. In 2007, the
Company's announced mineral resource estimates of the Thakadu prospect which included an estimated 4.7 million
tonnes of indicated resource grading 1.72% copper and 3.6 million tonnes of indicated resource grading 16 grams
per tonne silver. In addition to the Thakadu deposit, the Company has also identified copper-gold, nickel-PGM,
and zinc-lead-silver prospects worthy of further advanced exploration follow up.
MOWANA PROJECT DEVELOPMENT
The 2007 year concentrated on the construction and optimisation of the Mowana Mine Project. Management focused
on the development and construction of the process plant and mining infrastructure at Mowana in preparation for
commencement of plant commissioning. In addition, management focused on establishing and expanding reserve and
resource estimates, optimising pit designs, improving metallurgical recoveries and investigating the
implementation of Dense Media Separation ("DMS") technology all for the purpose of maximizing future commercial
operations.
Over the last two months of the year heavy rains hit Botswana leading to stoppages due both inclement weather
and waterlogged pit conditions. Management reacted well with proactive measures to maintain the project
schedule. With the onset of better weather the construction programme has intensified and continues to progress
within current plans. By the end of the year, over 700 employees and subcontractors were working on process
plant construction and mine development. At the end of February 2008, over 1,000 people were on site involved
in the ongoing construction and mining at Mowana.
Capital Costs have been kept within the revised budgets presented in November 2007. The estimated 8% (ZAR 35
million) increase in capital over the ZAR 430 million 2006 budget estimate was composed of intentional design
changes to the crushing circuit (4.5%) and to cost escalation that is being experienced throughout the
industry. As of the end of February 2008, construction of surface facilities was about 90% complete.
The Mowana Mine processing facility has been designed and built on a well-understood and proven flotation
process to produce saleable copper concentrates from the treatment of approximately 1 million tonnes per year
of oxide, supergene and sulphide ore. The concentrator contains both oxide and sulphide floatation circuits to
treat the predominately mixed ore from the upper parts of the Mowana open-pit. The concentrator could be
expanded to treat 2 million tonnes per year of sulphide ore since the installed capacity of the crushing
circuit and floatation tanks are estimated to be sufficient to support this throughput.
Excellent progress has been made in the preparation of the open-pit for commercial mining activity. In early
2007, the Company signed a five-year mining contract with Moolman Mining Botswana (Pty.) Ltd. Mining commenced
in July 2007 with the removal of free-digging loose material from the open-pit area. By the end of 2007, the
full fleet of face-loading shovels had arrived on-site and these were commissioned in January 2008. Currently
16 of the 26 100-tonne haul trucks are on-site in addition to all ancillary graders, bulldozers, loaders and
blast hole drill rigs. Even with the heavy rains experienced in January 2008 pre-stripping was maintained close
to schedule and blasting in the pit and stockpiling of ore had commenced by the end of January 2008. At the end
of March 2008, the stockpiles at Mowana consisted of about 200,000 tonnes of material at 0.9% copper, including
about 33,000 tonnes grading 1.8% copper on the high grade stockpile.
During the 2007 the Company continued to strengthen its management and operating team. By the end of the year,
the Company had filled all senior positions. The technical and operational team in Botswana has grown from 22
as at the end of 2006 to over 50 at the end of 2007 and currently numbers 77. Recruitment of junior level staff
is on-going. The Company expects to have approximately 175 employees when the Mowana Mine goes into production,
which is expected in the second quarter of 2008.
In January 2008 the Company signed a concentrate sale and purchase agreement (the "Off-take Agreement") with
MRI Trading AG ("MRI") for 100% of all copper products shipped from the Mowana Mine. The Off-take Agreement has
a duration of 5 years and is renewable. In conjunction with the Off-take Agreement, MRI subscribed for
7,284,000 ordinary shares of the Company at a subscription price of 0.70 Sterling per ordinary share.
Commissioning of the mechanical portions of the plant commenced in late March 2008 and should culminate in the
hot commissioning of the primary crusher in May 2008. First concentrate is expected as hot commissioning is
completed, and the Company expects to be shipping concentrate shortly thereafter. Completion of construction
activities on site is expected in July 2008 with a hand-over from EPCM teams to operational teams. Commercial
production is expected to be declared in the third quarter of 2008.
Development and construction highlights for the year include:
Process Plant
- 10 km all-weather access road completed
- Water bore field drilled, tested and equipped. Collection system and 12-kilometre pipeline finished ahead of
schedule.
- Ball mill on site and assembled on schedule
- Crushing circuits on-site
- All major concrete work complete
- Site electrical supply is connected to permanent grid power via a 19 kilometre 132 kV power line
Mining
- Pre-strip mining operations and drill-blast activities commenced with ore exposed on a number of faces and
ore stockpiled
-Waste mining schedule supports various bulk-fill activities for the construction programme.
-2 scraper fleets were utilized during the year to remove free-dig material within the open-pit at a reduced
mining cost to conventional load & haul applications
-Main mining fleet arrival began in November - currently 16 Komatsu 785 trucks on site, 2 DM 30 blast hole
rigs, 3 face loading shovels and ancillary bulldozers, graders and fuel trucks
General Site
- Continued work on installation of electrical systems, conveyors and general site infrastructure are well
progressed and according to current schedule.
- Housing development activities progressed with main infrastructure (water, power and sewerage) being
finalized and commencement of construction of the planned 50 houses.
-Key operational personnel moved on-site into temporary office accommodation to optimise managerial presence
and interface with EPCM during commissioning
EXPANDING MOWANA RESERVE AND RESOURCE ESTIMATES
The Company has a large land position in a favourable geological setting, which is relatively under explored at
depth and laterally. During 2007, management continued to focus on the expansion of the estimated resource base
at Mowana with the goal of extending the mine life by sourcing more material within the proximity of open-pit
mining operations and through underground access. Management also investigated the use of DMS technology which
provides the opportunity to access more copper units contained in waste from the supergene and sulphide ores
while also assisting in grade control and metallurgical smoothing of concentrator feed.
In June 2007 the Company issued an updated mineral resource estimate (in accordance with SAMREC, JORC and NI 43-
101 Standards) for the Mowana Project completed by independent consultants Caracle Creek International
Consulting ("CCIC"). The CCIC estimate was based on a further 17,000 metres of drilling as compared to the
previous estimates released in 2006. The CCIC Technical Report is dated June 2007 and entitled "Dukwe Copper
Project 2007 Geological Modelling and Resource Re-estimation" and available under the Company's profile on
SEDAR at www.sedar.com.
In November 2007 the Company issued a further technical report in order to report the estimated copper mineral
reserves and resources contained within the engineered open-pit designs. Pit designs were completed based on
the CCIC resource estimate released in June 2007. Independent consultant, Read, Swatman & Voigt (Pty) Ltd.
("RSV") reviewed the mineral resources at the Mowana Mine using a 0.1% copper cut-off. The RSV Technical Report
is dated 26 November 2007 and entitled "National Instrument 43-101 Technical Report on the Mowana Mine
Botswana" and is available under the Company's profile on SEDAR at www.sedar.com. The RSV Technical Report
estimated the resource base, at a 0.1% cut-off, to be 87.672 million tonnes of material grading 0.71% copper in
the Measured and Indicated categories with a further 46.275 million tonnes of material grading 0.63% copper in
the Inferred category, as set out below:
/T/
----------------------------------------------------------------------------
Mowana Mine Total Resource Estimate
Nov-07
Tonnage Copper Contained Metal
MT % tonnes Cu
----------------------------------------------------------------------------
Measured 42.45 0.65 275,900
Indicated 45.22 0.76 343,700
----------------------------------------------------------------------------
Total M&I 87.67 0.71 619,600
----------------------------------------------------------------------------
Inferred 46.27 0.63 291,500
----------------------------------------------------------------------------
Note: 0.1% copper cut-off, Measured, Indicated and Inferred resources
comply with the definitions of SAMREC, JORC and NI-43-101. For more
information see the technical report entitled "National Instrument 43-101
Technical Report on the Mowana Mine Botswana" and available on our website
at www.africancopper.com or under the Company's profile on SEDAR at
www.sedar.com.
/T/
The RSV Technical Report also reported, in accordance with SAMREC, JORC and NI 43-101 Standards, the following
mineral reserve and resource estimates contained within the engineered open-pit designs at the Mowana Mine
property:
/T/
----------------------------------------------------------------------------
Mowana Mine Reserve and Resource Estimate
Nov-07
Tonnage Copper Contained Metal
MT % tonnes Cu
----------------------------------------------------------------------------
Proven 10.82 1.00 108,000
Probable 3.98 1.40 56,000
----------------------------------------------------------------------------
Total proven & probable 14.80 1.11 164,000
----------------------------------------------------------------------------
In-pit Inferred resource 4.33 0.80 35,000
----------------------------------------------------------------------------
Note: 0.1% copper cut-off, Measured, Proven and Probable reserves comply
with the definitions of SAMREC, JORC and NI-43-101. For more information
see the technical report entitled "National Instrument 43-101 Technical
Report on the Mowana Mine Botswana" and available on our website at
www.africancopper.com or under the Company's profile on SEDAR at
www.sedar.com.
/T/
During the fourth quarter of 2007, the Company completed a drill programme to the south of the open pit that
hosts copper mineralization at the Mowana deposit. Sulphide mineralization at Mowana is known to continue to
the north and south of the deposit and at depth. The drill programme potentially extended mineralization for up
to 800 metres to the south of the pit. Drill assay information is pending and it is expected that this will be
used to model the results and evaluate estimated mineral resource potential during the second quarter of 2008.
Assuming that the grades encountered in this area are economic, management will integrate this newly-discovered
material into the comprehensive mine plan for Mowana.
GROWING PRODUCTION AT MOWANA
During 2007 management conducted a number of programmes to better define the near surface open-pit
mineralization and related higher grade trends, and optimise pit designs and mine production schedules.
Metallurgical studies were also conducted to optimise process design and recoveries, and explore the benefits
of a DMS plant. At the conclusion of these studies, the Company released its open-pit production profile in
February 2008 (see press release 25 February 2008) for the first five years of mining at the Mowana mine. The
resultant production estimates show a five-fold increase in annual copper production between 2008 and 2012:
/T/
----------------------------------------------------------------------------
2008 2009 2010 2011 2012
----------------------------------------------------------------------------
Estimated Cash US$/lb
Cost(i) $ 2.48 $ 1.90 $ 2.05 $ 1.78 $ 1.49
----------------------------------------------------------------------------
Estimated Tonnes
Production Cu 5,500 12,100 18,000 23,000 29,000
----------------------------------------------------------------------------
(i)The RSV Technical Report listed the operating cost assumptions for the
Mowana Mine which were used to develop the above estimates (see Section 18:
pages 127-133 of the RSV Technical Report).
/T/
Results from DMS plant studies and related metallurgical recovery testing conducted in 2007 exhibited better
recoveries and mass pulls of processing of supergene and sulphide mineralization. This material is at depth
beneath the oxide copper. As such sufficient supergene and sulphide material will not be accessed until 2010 so
any DMS plant construction and associated capital expenditures are not required until the end of 2009. The
Mowana Mine production plan contemplates processing the highest grade oxide ore directly through the dual oxide-
sulphide flotation concentrator in 2008 and 2009 while stockpiling lower grade material for future processing
through the DMS plant.
UNDERGROUND DEVELOPMENT
The Company's strategy is to commence mining at Mowana by extracting the open-pit reserve to provide initial
production and cash flow. Since the majority of the Mowana resources are not contained within the open-pit
limits, management is actively investigating the integration of underground access to the remaining estimated
resources. In 2007 a pre-feasibility study was commissioned to investigate the viability of an underground
mine. DMS studies completed during 2007 showed that it would be possible to use bulk mining methods underground
to extract mineralization and that this material could be upgraded prior to the introduction into the ball mill
and flotation circuits. A complete mine layout was developed in late 2007 which encompassed multi-level
development over the entire 2 kilometre strike extent of the known mineralization at Mowana to a depth of 850
metres.
Further design work has been undertaken to establish mining schedules for the trial mining phase. Ore access
strategy and target locations for optimal early exposure of supergene and sulphide mineralization are being
reviewed by the Company. The merit of the underground mine is that it would allow the Company to access the
large tonnage of resources that exist at Mowana, expand production and maximize the capacity in the processing
plant. In addition, lateral deep multi-level horizontal development will facilitate optimal underground diamond
drill locations for further evaluation and extension of the sulphide mineral resource estimate.
SHORTAGE OF POWER IN SOUTHERN AFRICA
Early in 2008, South Africa experienced a number of power shortages. To date African Copper has not experienced
any major impact due to these or any other power shortages at the Mowana site.
The shortages of power currently being experienced in South Africa are not expected to materially impact the
Mowana operation directly. The Mowana Mine is not yet drawing sufficient power on a consistent basis to impact
any usage in the country. The most significant use of power once production is established will be in the
crushing system, but this only needs to be operational for 8 to 10 hours per day. The Company is planning to
run the crusher during off-peak times and alleviate this risk. At the same time, it is studying the power
requirements with a view to sourcing additional backup standby generating capacity.
Power outages in South Africa have impacted suppliers in that country and their ability to provide components
in a timely manner. Piping and electrical cable deliveries have been challenging over the first part of 2008.
First fills of consumable supplies (reagents, grinding media, etc) continue to arrive and be stored on-site.
Nevertheless, the Mowana Mine project remains on-track to establish production in Q2 of 2008.
Botswana intends to be self-sufficient in power by 2012 through expansions at its Government owned coal mining
and electrical generation facilities.
THAKADU RESOURCE ESTIMATE AND CONTINUED EXPLORATION
The Matsitama prospecting licences cover a very large area of 3,000 km2 highly prospective mineral holdings.
These licences are contiguous with the Mowana deposit discussed above. Work during 2005 and 2006 concentrated
on the compilation and interpretation of a large geochemical, geophysical and drill database that had been
assembled over the previous 40 years of exploration on the Belt.
In 2006, the Company established an exploration base camp and initiated a 10,000 metre delineation drill
programme at the Thakadu deposits. The drilling was confined to depths that could be accessed by open-pit
methods although the deposits are known to continue to depth. This drilling programme was completed in 2006,
and final assays were received in the first quarter of 2007. In July of 2007, the Company published a resource
estimate for the Thakadu mineralization completed by RSG Global Consulting. RSG's technical report is dated 24
July 2007 and entitled "Database Review, Geological Modelling and Grade Estimation of the Thakadu Copper
Project" and is available on the Company's website at www.africancopper.com and under the Company's profile on
SEDAR at www.sedar.com:
/T/
Thakadu Resource Estimates (July 2007)
----------------------------------------------------------------------------
Copper resources Silver Resources
Tonnage Copper Tonnage g/t Ag
MT % MT
----------------------------------------------------------------------------
Indicated resource 4.715 1.72 3.558 16
----------------------------------------------------------------------------
Inferred resource 0.961 1.29
----------------------------------------------------------------------------
Note: Indicated and Inferred resources comply with the definitions of
SAMREC, JORC and NI-43-101. For more information see the technical report
entitled "Database Review, Geological Modelling and Grade Estimation of
the Thakadu Copper Project" and available on our website at
www.africancopper.com or at www.sedar.com
/T/
The geological mapping of drill core from Thakadu has led to new geological interpretations of the area. The
Company completed extensive TITAN geophysical surveys and geochemical surveys of the area in 2007. Several
unexplored geochemical anomalies have now become higher priority exploration targets. Drilling is on-going over
these targets.
The Thakadu deposits represent an advanced exploration project that may develop into a mining project in its
own right or, alternatively, as a complementary project running either in parallel or in series with the Mowana
Project. A preliminary economic assessment of the capital costs required to bring the Thakadu deposits to
production indicate that another deposit of similar size and grade is required in the immediate area in order
to justify the construction of a stand-alone plant. Exploration efforts will thus be focused on the unexplored
geophysical and geochemical anomalies within 5 kilometres of the Thakadu deposits.
The Matsitama Project has a wealth of systematic multidisciplinary exploration data that indicate substantial
areas of highly prospective terrain especially for sediment-hosted copper and zinc deposits. Recent compilation
work undertaken by the Company has brought several prospects outside of the Mowana and Thakadu-Makala deposits
into focus as locations deserving substantial additional exploration effort. These areas include:
- The Gaokae nickel-PGM anomaly
- Nakalakwana Hill copper-gold targets
- Phute copper anomaly
- The 75-kilometre Lepashe Snake copper anomaly
Recent compilation work by African Copper in the Nakalakwana area has shown a relationship between copper and
gold in historic drilling work. A preliminary 1,700 metre drill programme was completed in 2007 to test
geological interpretations of the area. In addition, an extensive TITAN geophysical survey was completed over
the substantial potassium radiometric anomaly that occurs in this area. Drill testing continued throughout
2007. Disappointingly, exploration and drilling efforts were hampered in 2007 as a result of excessively long
turnaround times for sample analyses leading to delayed interpretation and siting of ongoing drill targets. In
many situations, the time from submittal until receipt of assays was in excess of 12 weeks.
Additional information with respect to the Matsitama Project is contained in a technical report dated 30 March
2006 and entitled "Technical Report on the Dukwe Copper Project and Matsitama Prospecting Licences, Botswana
Africa", which is available under the Company's profile on SEDAR at www.sedar.com.
THE OUTLOOK FOR COPPER
Commodities, including copper, have been rising due to continued increases in both operating and capital costs,
which are impacting long-term margins and the incentive price required to deliver an acceptable return on new
projects. In recent years China and India have overwhelmingly dominated demand growth and the importance of the
United States has declined. Supply side shocks as opposed to rapid increases in demand positively impacted
prices in 2007. Restricted supply-side response and low inventories have under-pinned copper prices as strikes,
weather, resource nationalism, changes in tax regimes and power shortages have reduced units of copper to the
market. Long-term prices are being revised upwards and a number of market analysts are expecting that long-term
prices will remain above their long-term average for the next few years.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements requires the Company to select from possible alternative accounting
principles, and to make estimates and assumptions that determine the reported amounts of assets and liabilities
at the balance sheet date, and reported costs and expenditures during the reporting period. Significant
estimates and assumptions include those related to the recoverability of mineral properties, estimated useful
lives of capital assets, stock compensation and financial instruments valuation assumptions and determination
as to whether costs are expensed or deferred. While management believes that these estimates and assumptions
are reasonable, actual result could vary significantly. A summary of the critical account estimates is listed
below.
Resource Properties, Deferred Exploration and Mine Development Costs:
Exploration and evaluation costs arising following the acquisition of an exploration licence are capitalised on
project-by-project basis, pending determination of the technical feasibility and commercial viability of the
project. Upon demonstration of the technical and commercial feasibility of a project, any past deferred
exploration and evaluation costs related to that project will be reclassified as mine development and
infrastructure.
Capitalised deferred exploration expenditures are reviewed for impairment losses at each balance sheet date. In
the case of undeveloped properties, there may be only inferred resources to form a basis for the impairment
review. The review is based on a status report regarding the Company's intentions for development of the
undeveloped property. The Company may periodically revise its valuation based on additional exploration results
and determine that the carrying value of the property on the balance sheet is impaired. When such a change in
estimate is made, there may be a material effect on the balance sheet and income statement.
Based on the fact that the Board approved development of the Mowana Mine Project in September 2006 the deferred
exploration costs incurred to date on Mowana were reclassified as mine development and infrastructure costs and
future general and administrative costs expensed. Mowana mine development and infrastructure costs comprise the
largest component of the Company's non-current assets and as such the evaluation of impairment of these assets
has a significant effect on the Company's financial statements. The assessment of the carrying value involves
the study of geological and economic data (including resource estimates) and the reliance on a number of
assumptions. These estimates of resources may change based on additional knowledge gained subsequent to the
assessment. This may include additional data available from the continued development activities of the Mowana
Mine Project, actual production data when available or the impact of economic factors such as changes in the
price of copper or the cost of construction and development costs or the cost of components of production.
Asset Retirement Obligations:
Asset retirement obligations are future costs to retire an asset including dismantling, remediation and ongoing
treatment and monitoring of the site. The liability is accreted over time through period charges to the
Consolidated Income Statement. In addition, the asset retirement cost is capitalised as part of the asset's
carrying value and amortized over the asset's useful life. Subsequent to the initial recognition of the asset
retirement obligation and associated asset retirement cost, changes resulting from a revision to either timing
or amount of estimated cash flows are prospectively reflected in the year those estimates change.
The Company estimates the total discounted amount of cash flows required to settle its asset retirement
obligations at 31 December 2007 is Pounds Sterling 464,078. Although the ultimate amount to be incurred is
uncertain, the independent Environmental Impact Statement, completed on the Mowana Mine by Water Surveys
Botswana (Pty) Limited in September 2006, using an assumption that mining continues to 2023, estimated the
undiscounted cost to rehabilitate the Mowana Mine site of 24.3 million Pula (Pounds Sterling 2 million).
Under the terms of the Mining Licence, by the end of the first financial year in which copper is produced and
sold, the Company must establish a trust fund to provide for rehabilitation of the Mowana Mine site once the
mine closes. The Company will annually make contributions to this fund over the life of the mine so that these
capital contributions together with the investment income earned will cover the anticipated costs. At the end
of each financial year, the Company will reassess the estimated remaining life of mine as well as the cost to
rehabilitate the mine site and adjust its annual contributions accordingly.
Derivative Financial Instruments:
The Company uses derivative financial instruments, in particular copper put contracts, to manage financial
risks associated with their underlying business activities and the financing of those activities. Derivative
financial instruments are measured at their fair value. Financial assets and liabilities are recognised on the
balance sheet when the Company has become party to the contractual obligations of the instrument. Derivative
financial instruments, which are not effective hedges, are measured at fair value, with the movement in fair
value being recognized in the consolidated income statement for the period. Movements in the fair value of
derivative financial instruments which are considered effective hedges are recognised directly in equity.
Share Based Payments:
The Company is required to charge the Consolidated Income Statement with the fair value of the options issued.
This calculated charge amount is not based on historical cost, but is derived based on assumptions input into
an option pricing model. The model requires that management make several assumptions as to future events,
including: an estimate of the average future hold period of issued stock options before exercise, expiry or
cancellation; future volatility of the Company's share price in the expected hold period (using historical
volatility as a reference); and the appropriate risk-free rate of interest. The resulting value calculated is
not necessarily the value of which the holder of the option could receive in an arm's length transaction, given
there is no market for the options and they are not transferable. The value derived from the option pricing
model is highly subjective and dependent entirely upon the input assumptions made. The fair value of the option
is either expensed or capitalised as a deferred exploration cost depending on the nature of the employee
services received.
OVERALL FINANCIAL PERFORMANCE FOR FISCAL 2007
The Company recorded a net gain for fiscal 2007 of Pounds Sterling 117,409 (0.09p), compared with a net loss of
Pounds Sterling 2,100,884 (2.20p) in fiscal 2006. As evidenced in the following table, higher bank interest
receivable and foreign exchange gains more than offset higher corporate costs and Botswana administration costs
contributing to the net gain in fiscal 2007.
/T/
----------------------------------------------------------------------------
Year ended Year ended
31 December 31 December
2007 2006
Pounds Sterling Pounds Sterling
----------------------------------------------------------------------------
Bank interest receivable (2,986,190) (1,645,501)
Corporate general and administration 143,420 168,487
Corporate consultants, salaries
and benefits 672,155 295,306
Botswana general and administration 239,772 -
Botswana administrative salaries
and benefits 270,470 -
Insurance 106,141 55,719
Directors fees 67,800 55,975
Investor relations and public company
administration 192,981 97,892
Travel, accommodation 179,735 94,657
Professional fees 347,230 251,201
Share based compensation 518,657 562,199
----------------------------------------------------------------------------
2,738,359 1,581,436
Foreign exchange (gain)/loss (275,811) 2,103,070
Hedging loss 406,231 -
Tax - 61,880
----------------------------------------------------------------------------
Net loss/(gain) (117,409) 2,100,884
----------------------------------------------------------------------------
/T/
Bank interest receivable:
Bank interest receivable for fiscal 2007 increased to Pounds Sterling 2,986,190 from Pounds Sterling 1,645,501
in fiscal 2006. The higher bank interest receivable related to higher average cash balances throughout the
current year compared to the previous year.
Corporate general and administration, consultants, salaries and benefits:
During fiscal 2007, the Company incurred a total of Pounds Sterling 143,420 (2006: Pounds Sterling 168,487) in
corporate general and administrative expenses. The decrease in corporate costs was in part due to savings
realized by rationalizing corporate office space. Corporate consultant and management compensation costs
increased to Pounds Sterling 672,155 during fiscal 2007 from Pounds Sterling 295,306 in fiscal 2006. One of the
reasons for the increase related to a severance amount of Pounds Sterling 127,200 paid during the first quarter
of fiscal 2007 to D. Jones pursuant to a termination agreement between the Company and D. Jones as part of the
planned succession as D. Jones moved from the CEO role to Deputy Chairman, making way for J. Hamilton to move
from the COO role to CEO. The remaining increase related to the hiring of a Vice President of Investor
Relations and the allocation of certain consulting fees between capitalization to projects and expense
depending on the nature of the consultants' work.
Botswana general and administration, salaries and benefits:
As described under "Critical Accounting Estimates - Resource Properties, Deferred Exploration and Development
Costs" in this MD&A costs related to the Mowana Mine Project are now being capitalized to mine development and
infrastructure with general and administration costs being expensed. During fiscal 2007, Botswana general
administration costs of Pounds Sterling 239,772 and administrative salaries and benefits of Pounds Sterling
270,470 were expensed.
Insurance:
Insurance expense for 2007 increased to Pounds Sterling 106,141, compared to Pounds Sterling 55,719 in 2006.
The higher insurance cost during 2007 relates to increases in Directors and Officers insurance costs, and a
portion of the insurance consulting and coverage costs incurred in connection with the development and
construction of the Mowana Mine.
Investor relations and public company administration:
Investor relations and public company administration costs increased to Pounds Sterling 192,981 compared with
Pounds Sterling 97,892 in 2006 as the Company implemented a more comprehensive investor relations programme
during 2007. Increased costs related to the cost of attending and presenting at more events and the redesign of
the Company's website. During fiscal 2007, the Company also incurred TSX listing fees of Pounds Sterling 10,800
in connection with ordinary shares that were issued in June 2007 as part of the private placement with Botswana
institutional investors.
Travel and accommodation:
Travel, accommodation, analyst trip and conference costs increased to Pounds Sterling 179,735 in fiscal 2007
compared to Pounds Sterling 94,657 in fiscal 2006. Travel and accommodation costs increased during 2007
reflecting increased corporate and operational travel to and from Botswana. In addition, certain corporate
travel expenditures were re-classified during 2006 to share premium as a cost of completing the June 2006
public offering.
Professional fees:
Professional fees increased from Pounds Sterling 251,201 in fiscal 2006 to Pounds Sterling 347,230 in fiscal
2007 in part as a result of increased audit, legal and other consulting fees. Fees were incurred on
professional mandates for banking facilities and related due diligence, corporate development activities and
executive search fees.
Share-based compensation:
Share based compensation expenses of Pounds Sterling 518,657 (2006:Pounds Sterling 562,199) are non-cash
expenses and reflect the derived value of stock options vested during the year. An additional amount of Pounds
Sterling 209,458 (2006: Pounds Sterling 429,443) was recorded as a non-cash expenditure to deferred exploration
costs as the grant of options was made to personnel whose compensation is capitalized to the relevant deferred
exploration property. During fiscal 2007 0.2 million options were granted compared to 8.7 million in fiscal
2006. The lower share based compensation expensed and capitalized in fiscal 2007 reflects a lower number of
stock options vested during fiscal 2007 compared to fiscal 2006. The fair value of stock options when granted
is amortized to the Income Statement over the period in which the options vest.
Foreign exchange:
During fiscal 2007, the Company recorded a foreign exchange gain of Pounds Sterling 0.3 million compared to a
loss of approximately Pounds Sterling 2.1 million in fiscal 2006. The Company has foreign currency exposure
with respect to items denominated in foreign currencies. The Company holds and transacts business in multiple
currencies, the most significant of which are British Pounds Sterling ("Sterling"), Botswana Pula ("Pula"),
South African Rand ("Rand"), Canadian Dollar and US Dollar. As a result, the Company has exposure with respect
to items denominated in foreign currencies.
The Pula is considered the functional currency for the Company's Botswana subsidiaries. Accordingly, assets and
liabilities of the Botswana subsidiaries are translated into Sterling using the exchange rates in effect at the
balance sheet dates. Translation gains and losses are included in a separate component of shareholders' equity.
During 2007 the foreign exchange translation gain recognized in shareholders' equity was Pounds Sterling 0.8
million compared to the translation loss of Pounds Sterling 1.67 million in 2006.
The Company's net monetary asset and liability positions held outside of Botswana are translated into Sterling
at each balance sheet date. Fluctuations in the value of Sterling relative to these other currencies impacted
the Company's reported foreign exchange gain in fiscal 2007. This fiscal 2007 gain related primarily to the
foreign currency translation gains on currency holdings of Canadian dollars and Rand.
Hedging loss:
In May 2007 the Company purchased copper put options giving the Company the right, but not the obligation, to
sell up to 5,850 tonnes of copper at a strike price of US$3.00/lb divided evenly over the period April 2008 to
December 2008.
The Company realized a hedging loss of $406,231 during fiscal 2007 on put contracts that were settled prior to
the anticipated start of commercial production as these contracts ceased to be classified as effective hedges.
Accordingly, the non-cash losses on the April, May and June 2008 put contracts were expensed in the
Consolidated Profit and Loss Statement since commercial production is planned to commence in July 2008. As
described under "Critical Accounting Estimates - Derivative Financial Instruments" in this MD&A mark to market
movements in the fair value of the put contracts which are considered effective hedges are recognised directly
in equity.
OVERALL FINANCIAL PERFORMANCE FOR THE THREE MONTHS ENDED 31 DECEMBER 2007
For the quarter ended 31 December 2007, the Company recorded a net loss of Pounds Sterling 146,811 (2006: net
loss Pounds Sterling 1,521,716), or 0.11p per share (2006: 1.17p per share). Foreign exchange gains and lower
costs related to share-based compensation all contributed to the lower loss recorded in the fourth quarter of
2007.
/T/
----------------------------------------------------------------------------
Three months Three months
ended ended
31 December 31 December
2007 2006
Pounds Sterling Pounds Sterling
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Bank interest receivable (701,279) (653,176)
Corporate G&A, consultants, salaries and
benefits 205,135 55,081
Botswana G&A, salaries and benefits 203,891 -
Insurance 9,899 13,049
Directors fees 16,950 11,650
Investor relations and public company
administration 31,875 4,157
Travel, accommodation 66,476 4,849
Professional fees 160,152 112,636
Share based compensation 54,140 105,396
Depreciation (53,484) -
----------------------------------------------------------------------------
695,034 306,818
Foreign exchange (gain)/loss (253,175) 1,806,194
Hedging loss 406,231 -
Tax - 61,880
----------------------------------------------------------------------------
Net loss/(gain) 146,811 1,521,716
----------------------------------------------------------------------------
/T/
Bank interest receivable:
Bank interest receivable for the fourth quarter of fiscal 2007 increased to Pounds Sterling 701,279 (2006:
Pounds Sterling 653,176). Even though average cash balances were lower in the fourth quarter of fiscal 2007
compared to the same period in fiscal 2006, interest rates were higher generating more bank interest receivable
than during the same period in fiscal 2006.
Corporate general and administration, consultants, salaries and benefits:
During the fourth quarter of 2007, the Company incurred a total of Pounds Sterling 205,135 (2006: Pounds
Sterling 55,081) in corporate general and administrative expenses. Corporate consultant and management
compensation costs increased to Pounds Sterling 165,390 during the fourth quarter of 2007 from Pounds Sterling
77,831 in the same period in fiscal 2006. One of the primary reasons for the increase related to an increased
allocation in fiscal 2006 certain consulting fees to capitalization of projects rather than expense depending
on the nature of the consultant's work. In addition, corporate general and administration was reduced in the
fourth quarter of fiscal 2006 as a result of a UK Value Added Tax refund received upon the Company being
registered.
Botswana general and administration, salaries and benefits:
As described under "Critical Accounting Estimates - Resource Properties, Deferred Exploration and Development
Costs" in this MD&A costs related to the Mowana Mine Project are now being capitalized to mine development and
infrastructure with general and administration costs being expensed. During the fourth quarter 2007, Botswana
general administration costs of Pounds Sterling 119,133 and administrative salaries and benefits of Pounds
Sterling 84,758 were expensed.
Investor relations and public company administration:
Shareholder communication and public company administration costs increased to Pounds Sterling 31,875 (2006:
Pounds Sterling 4,157) Travel for investor relations personnel and fees paid to a third party consulting firm
to assist with retail marketing were the primary reasons for the increase in the further quarter of fiscal 2007
along with timing of certain year-end public company administration and press release costs.
Travel and accommodation:
Travel, accommodation, analyst trip and conference costs increased to Pounds Sterling 66,476 in fourth quarter
of 2007 compared to Pounds Sterling 4,849 in the same period in fiscal 2006. Corporate activity increased
during the fourth quarter of fiscal 2007 with more travel to Botswana for corporate development purposes and a
director's meeting. In addition, the increase was due to hosting an analyst trip and attending and presenting
at a retail investment in the United States. Travel and accommodation costs were lower during the same period
in 2006 due to an increased allocation in fiscal 2006 certain travel fees to capitalization of projects rather
than expense depending on the nature of the travel cost.
Professional fees:
Professional fees increased from Pounds Sterling 112,636 in fourth quarter of fiscal 2006 to Pounds Sterling
160,152 in fourth quarter of fiscal 2007 in part as a result of increased audit and legal fees.
Foreign exchange:
During fourth quarter of 2007, the Company recorded a foreign exchange gain of Pounds Sterling 0.25 million
compared to a loss of approximately Pounds Sterling 1.8 million in fourth quarter of 2006. Fluctuations in the
value of Sterling relative to the Rand was the primary contributor to the Company's reported foreign exchange
gain in the fourth quarter of fiscal 2007. This gain related primarily to the foreign currency translation
gains on currency holdings of Canadian dollars and Rand. The foreign exchange loss recognized in the fourth
quarter of fiscal 2006 related primarily to the foreign currency translation losses on currency holdings of
Canadian dollars and Rand.
Hedging loss:
The Company realized a hedging loss of $406,231 during the further quarter of fiscal 2007 on put contracts
settled prior to the anticipated start of commercial production as these contracts ceased to be classified as
effective hedges. Accordingly, the losses on the April, May and June 2008 put contracts were expensed in the
Consolidated Profit and Loss Statement. As described under "Critical Accounting Estimates - Derivative
Financial Instruments" in this MD&A mark to market movements in the fair value of the put contracts which are
considered effective hedges are recognised directly in equity.
Capital Expenditures
The most significant ongoing investing activities during fiscal 2007 were expenditures for the development, pre-
strip mining and construction of the Mowana Mine. In addition, capital was also spent for exploration
programmes at the Matsitama Project and in areas surrounding the Mowana Mine.
Mowana Mine - mining development and infrastructure and mine plant and equipment
Construction and pre-strip mining activities at the Mowana Mine accelerated with expenditures totalling Pounds
Sterling 13.9 million during the three months ended 31 December 2007 and Pounds Sterling 34.3 million during
the year ended 31 December 2007 as follows:
/T/
----------------------------------------------------------------------------
For the Three months For the Year
ended ended
31 December 2007 31 December 2007
Pounds Sterling '000 Pounds Sterling '000
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance at beginning of period: 34,384 13,963
General yard and site work 1,793 8,848
Process plant 3,459 8,399
Owners cost (180) 568
Geology 395 923
Mining 6,470 12,867
Ancillary facilities 497 562
Share-based expenses (24) 209
Fixed assets 1,320 1,740
Depreciation (62) (136)
Asset retirement obligation 9 464
Foreign exchange 187 (159)
----------------------------------------------------------------------------
Ending balance 48,248 48,248
----------------------------------------------------------------------------
----------------------------------------------------------------------------
/T/
Mowana Mine - deferred exploration expenditures
The Company spent Pounds Sterling 51,361(2006: Pounds Sterling 27,639) during the three months ended 31
December 2007 and Pounds Sterling 385,661 (2006: Pounds Sterling 27,639) during the year ended 31 December 2007
on exploration activities in the area surrounding the Mowana Mine in the Mowana prospecting licence area. Work
during the quarter included diamond drilling at the prospect to the south (within the structure hosting
mineralization), further compilation and interpretation of geophysical surveys, geochemical orientation surveys
and surface prospecting in the vicinity of geochemical anomalies.
/T/
----------------------------------------------------------------------------
For the Three months For the Year
ended ended
31 December 2007 31 December 2007
Pounds Sterling '000 Pounds Sterling '000
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Opening balance 362 28
Geological and geophysical 3 61
Drilling and Assay 9 169
Resource Estimate (28) -
Administration 37 66
Salaries 31 90
Foreign exchange (1) (1)
----------------------------------------------------------------------------
Ending balance 413 413
----------------------------------------------------------------------------
----------------------------------------------------------------------------
/T/
Matsitama Exploration Project - deferred exploration expenditures
The Company spent Pounds Sterling 561,854 (2006: Pounds Sterling 582,523) during the three months ended 31
December 2007 and Pounds Sterling 1,929,312 (2006: Pounds Sterling 1,699,787) during the year ended 31 December
2007 on exploration activities in the Matsitama prospecting licence area as follows:
/T/
----------------------------------------------------------------------------
For the Three months For the Year
ended ended
31 December 2007 31 December 2007
Pounds Sterling '000 Pounds Sterling '000
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Beginning Balance 3,347 1,980
Drilling 167 724
Assay 45 90
Geological 73 175
Geophysical 15 287
Site management and logging 8 44
Depreciation capitalized 4 16
Administration 164 571
Share-based expenses (33) -
Foreign exchange 119 22
----------------------------------------------------------------------------
Ending balance 3,909 3,909
----------------------------------------------------------------------------
----------------------------------------------------------------------------
/T/
Summary of Annual Results
The Company was incorporated on 11 February 2004. The Company's reporting currency is Sterling. The Company's
subsidiary measurement currencies include: Mortbury (Sterling), Messina Copper (Botswana) (Proprietary) Limited
(Pula) and Matsitama Minerals (Proprietary) Limited (Pula). The following table sets out selected annual
information on the Company, which data has been prepared in accordance with applicable IFRS:
/T/
----------------------------------------------------------------------------
Year ended Year ended Year ended
31 December 2007 31 December 2006 31 December 2005
(audited) (audited) (audited)
(Pounds Sterling) (Pounds Sterling) (Pounds Sterling)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Interest Income (2,986,190) (1,645,501) (529,623)
Operating expenses 2,868,781 3,684,505 1,124,887
(Profit)/Loss
before tax (117,409) 2,039,004 595,264
(Profit)/Loss
after tax (117,409) 2,100,884 612,206
Basic
(Earnings)/Loss per
ordinary share (0.09)p 2.20p 1.19p
Diluted
(Earnings)/Loss
per ordinary share (0.09)p 2.20p 1.19p
Total assets 82,908,632 69,872,753 18,181,762
Total liabilities (6,942,607) (1,905,251) (1,912,530)
----------------------------------------------------------------------------
Shareholders' equity 75,966,025 67,967,502 16,269,232
----------------------------------------------------------------------------
/T/
The higher loss in fiscal 2006 compared to fiscal 2005 relates primarily to higher foreign exchange losses and
share based compensation charges. These increased charges were partially offset by increased interest income
earned in fiscal 2006 as a result of higher average cash balances. Please see "Overall Financial Performance"
in this MD&A for a detailed description of the fiscal 2007 gain compared to the fiscal 2006 loss.
Fiscal 2005 was the first year of normal operations for the Company due to the fact that prior to completing
its initial public offering in November 2004 the Company had limited financial resources to pursue its business
plan.
Summary of Quarterly Results
The following table sets out selected financial data on the Company for the most recently completed eight
quarters, which data has been prepared in accordance with applicable IFRS:
/T/
----------------------------------------------------------------------------
Q4 Q3 Q2 Q1
31 Dec. 30 Sept. 30 June 31 March
2007 2007 2007 2007
(Pounds (Pounds (Pounds (Pounds
Sterling) Sterling) Sterling) Sterling)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Interest revenues (701,279) (795,500) (785,736) (703,675)
Net loss /(gain)after tax 146,811 (393,693) (49,761) 179,234
Basic loss/(earnings) per
ordinary share 0.11p (0.28)p (0.04)p 0.14p
Diluted loss /(earnings) per
ordinary share 0.11p (0.26)p (0.04)p 0.14p
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Q4 Q3 Q2 Q1
31 Dec. 30 Sept. 30 June 31 March
2006 2006 2006 2006
(Pounds (Pounds (Pounds (Pounds
Sterling) Sterling) Sterling) Sterling)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Interest revenues (653,176) (660,398) (239,461) (92,466)
Net loss /(gain)after tax 1,521,716 679,851 (254,523) 153,840
Basic loss/(earnings) per
ordinary share 1.17p 0.53p (0.36p) 0.30p
Diluted loss /(earnings) per
ordinary share 1.17p 0.53p (0.36p) 0.30p
----------------------------------------------------------------------------
/T/
Please review the discussion under the heading "Overall Financial Performance" in this MD&A for an explanation
of the financial results and exchange gains/losses and related period-to-period changes for the three and
twelve-month periods ended 31 December 2007.
Fluctuations in the Company's expenditures reflect increases in administrative costs and professional fees
associated with seasonal corporate filing and regulatory activities. Specifically, the increased costs related
to the preparation of year-end audit files and annual meeting materials, as well as the impact of year-end
audit adjustments to financial statements.
Liquidity and Capital Resources
At 31 December 2007, the Company's main sources of liquidity until the Mowana Mine reaches commercial
production and produces positive cash flow were its cash and cash equivalents of Pounds Sterling 22.4 million
(31 December 2006 - Pounds Sterling 53.3), debt and project finance alternatives, equity markets and the
possible exercise of share options.
On 28 March 2008, Messina Copper (Botswana) (Pty) Ltd ("Messina"), African Copper's 100% owned subsidiary,
received binding subscription agreements as part of a Pula 200 million Botswana Note Programme for Pula 150.0
million (Pounds Sterling 11.4 million) notes from local Botswana institutions (the "Botswana Bond"). The
Botswana Bond is denominated in Pula and is an unsecured fixed rate note that bears interest at 14.0% per annum
and has a bullet maturity in 7 years. The Company has also raised approximately Pounds Sterling 5.0 million in
additional equity in 2008. In addition, to provide the Company with additional operational flexibility
management is in advanced discussions with several financial institutions regarding the establishment of a
revolving working capital and hedging facility for the Mowana Mine.
The Company has sufficient financial resources to commence production at the Mowana Mine and adequate working
capital for the foreseeable future, being a period of not less than twelve months from 30 March 2008. In the
event of operational cost overruns or delays, management believes the Company has adequate flexibility to
manage expenditures.
Management intends to complete development of the open pit mining operations with the addition of a DMS plant
to the processing plant (planned operational in 2010), further evaluate developing the underground portion of
the mine at Mowana and continue with the Matsitama exploration project. With existing working capital, which
includes the proceeds from the Botswana Bond, and the contemplated revolving working capital and hedging
facility, the Company does not anticipate that further equity financings will be required and anticipates that
any future capital commitments for the underground project at the Mowana Mine will be met from seeking project
finance. Should project finance not be available to fund the underground project the Company would, however,
consider raising capital in the equity markets based on current market conditions at the time, and, in any
event, the Mowana open-pit mining operations can be operated without the underground project being pursued. The
copper price on world markets is the single most important variable affecting the liquidity, cash flow and
profitability of the Mowana Mine once it reaches commercial production.
The majority of the Company's current contractual obligations relate to commitments in respect of development
expenditures for the completion of construction at the Mowana Mine and possible termination payments to the
mining contractor at the Mowana Mine should the Company terminate the mining contract early. As described
above, Messina was required to secure the Bank Guarantee in support of certain payment obligations in the
mining contract. (See Note 10 - Other Non-Current Assets).
/T/
At 31 December 2007, commitments under such agreements total
Pounds Sterling 18.9 million:
----------------------------------------------------------------------------
Total 2008 2009 2010
Pounds Pounds Pounds Pounds
Contractual Obligations Sterling Sterling Sterling Sterling
'000 '000 '000 '000
----------------------------------------------------------------------------
Goods, services and long
lead equipment(a) 14,614 14,614 - -
Mining contract(b) 3,356 3,356 -
Matsitama exploration
licences(c) 777 775 1 1
Lease agreements(d) 136 121 15
----------------------------------------------------------------------------
18,883 18,866 16 1
----------------------------------------------------------------------------
----------------------------------------------------------------------------
/T/
(a) The Company and its subsidiaries have a number of agreements with arms-length third parties who provide a
wide range of goods and services and long-lead time equipment. The primary commitments relate to the
engineering, procurement, construction and management contract ("EPCM") for the construction of the flotation
concentrator and related housing and mine facilities at the Mowana Mine.
(b) In the event of the optional termination of the Moolman Mining Botswana (Pty) Ltd. mining contract by the
Company, a maximum early termination payment of approximately Pounds Sterling 2.6 million, which payment may be
reduced, depending upon the number of months notice given, to Pounds Sterling nil upon 6 months notice,
together with demobilization charges would be payable.
(c) Under the terms of the Company's prospecting licences Matsitama is obliged to incur certain minimum
expenditures.
(d) The Company has entered into agreements for lease premises for various periods until 30 August 2009.
During 2007, a total of Pounds Sterling 163,961 was generated from the exercise of 350,000 share options to
purchase ordinary shares at C$0.25 each and 350,000 share options at 35p each. These share options were
originally granted under the stock option plan of Mortbury Limited.
On 26 June 2007, a total of 8,367,772 ordinary shares were issued at a price of 11 Pula (approximately Sterling
0.89) per ordinary share, raising total proceeds of 87,443,217 Pula (approximately Sterling 7.0 million) net of
expenses.
In conjunction with the off-take agreement signed with MRI on 25 January 2008, MRI subscribed for 7,284,000
ordinary shares at a subscription price of Pounds Sterling 0.70 per ordinary share. The private placement
closed on 8 February 2008.
At 31 March 2008, outstanding share options and underwriter's options represented a total of 11,215,000
ordinary shares issuable for maximum aggregate proceeds of Pounds Sterling 8,646,550 if and when exercised.
Proposed Transactions
There are no proposed assets or business acquisitions or dispositions before the Board for consideration.
Off-Balance Sheet Arrangements
The Company has not entered into any off-balance sheet transactions.
Transactions with Related Parties
The Company was charged Pounds Sterling 10,758 (2006 - Pounds Sterling 17,625) and Pounds Sterling 22,508 (2006
- Pounds Sterling 76,856) for the three and twelve months ended 31 December 2007 by the Dragon Group, a group
controlled by A. J. Williams, a director of the Company, for the provision of fully-serviced office
accommodation in the UK and reimbursed expenses. Accounts payable at 31 December 2007 were Pounds Sterling
8,627 (2006 - Pounds Sterling 35,731).
The Company was charged Pounds Sterling 20,252 (2006 - Pounds Sterling 23,548) and Pounds Sterling 79,064 (2006
- Pounds Sterling 81,718) for the three and twelve months ended 31 December 2007 by the Summit Resource
Management Limited, a company controlled by D. Jones, a director and the Deputy Chairman of the Company, for
the provision of fully-serviced office accommodation in Canada and reimbursed expenses. Accounts payable at 31
December 2007 were Pounds Sterling 5,288 (2006 - Pounds Sterling 196). The services are provided under a one
year contract that expires on 1 September 2008.
The Company entered into an agreement with Pickax International Corp. ("Pickax") and Joseph Hamilton on 1 July
2006 pursuant to which Pickax agreed to cause Joseph Hamilton to provide services to the Company, in the
capacity of Chief Operating Officer. The agreement replaced an existing executive services agreement on
materially the same terms and conditions and was subsequently amended to reflect Mr. Hamilton's appointment as
Chief Executive Officer of the Company. During the term of the agreement, Pickax will be paid Pounds Sterling
164,800 per year. The Company was charged Pounds Sterling 41,200 (2006: Pounds Sterling 41,200) during the
three months ended 31 December 2007 and Pounds Sterling 164,800 (2006: Pounds Sterling 82,400) during the year
ended 31 December 2007 by Pickax. Pickax is a corporation controlled by Joseph Hamilton, the Chief Executive
Officer and a director of the Company.
The Company was charged an aggregate Pounds Sterling 100,646 (2006 - Pounds Sterling 34,607) for the twelve
months ended 31 December 2007 by Aegis Instruments, Micromine (Botswana) Pty and MGE Consulting, each owned by
S. Bate, a director of a subsidiary of the Company, in respect of the provision of geophysical and geological
consulting and administration services. Accounts payable at 31 December 2007 were Pounds Sterling 27,482 (2006
- Pounds Sterling 3,215).
These related party transactions were in the normal course of operations and were measured at the exchange
amounts.
RISKS
The exploration for and exploitation of natural resources are speculative activities that involve a high degree
of risk. The following risk factors should be considered in assessing the Company's activities. Should any one
or more of these risks occur, it could have a material adverse effect on the business, prospects, assets,
financial position or operating results of the Company. The risks noted below do not necessarily comprise all
those faced by the Company. Additional risks not currently known to the Company or that the Company currently
deems would not likely influence an investor's decision to purchase securities of the Company may also impact
the Company's business, prospects, assets, financial position or operating results.
The Company currently depends significantly on a single project, the Mowana Mine
The Company's activities are focused primarily on the Mowana Mine. Any adverse changes or developments
affecting this project would have a material and adverse effect on the Company's business, financial condition,
results of operations and prospects.
Copper price volatility may affect the production, profitability, cash flow and financial position of the
Company.
The Company's revenues, if any, are expected to be derived from the extraction and sale of copper concentrate.
The price of copper has fluctuated widely, particularly in recent years, and is affected by numerous factors
beyond the Company's control, including international, economic and political trends, expectations of
inflation, currency exchange fluctuations, interest rates, global or regional consumption patterns, speculative
activities and increased production due to new extraction developments and improved extraction and production
methods. In recent years, the price of copper has been affected by changes in the worldwide balance of copper
supply and demand, largely resulting from economic growth and political conditions in China and other major
developing economies. While this demand has resulted in higher prices for copper in recent years, if Chinese
economic growth slows, it could result in lower prices for copper. The effect of these factors on the price of
copper, and therefore the current or future economic viability of any of the Mowana Mine and any other of the
Company's projects, cannot accurately be predicted. Any material decrease in the prevailing price of copper for
any significant period of time would have an adverse and material impact on the economic evaluations contained
in this MD&A and on the Company's results of operations and financial conditions, as well as the economic
viability of the Projects.
The development of the Mowana Mine into commercial operation on time and budget and its economic viability
cannot be guaranteed
In general, development projects have no operating history upon which to base estimates of future cash
operating costs. For development projects such as the Mowana Mine, estimates of mineral resources and mineral
reserves are, to a large extent, based upon the interpretation of geological data obtained from drill holes and
other sampling techniques and feasibility studies. This information is used to calculate estimates of the
capital costs and cash operating costs based upon anticipated tonnage and grades of ore to be mined and
processed, the configuration of the ore body, expected recovery rates, comparable facility and equipment
operating costs, anticipated climatic conditions and other factors.
At 30 March 2008 the capital costs to achieve production from the Mowana Mine are about 80% complete and can
still be affected by cost escalation and currency fluctuations. The Company has attempted to place firm orders
for much of the equipment necessary to achieve production and thereby confirm prices and control cost
escalations. Operating costs are dependent on the costs of various reagents, supplies, spares and labour. While
open pit mining costs can sometimes be better estimated than underground mining costs, they are also very
dependent on fuel, tyre and maintenance costs, foreign currency exchange rates and availability of skilled
labour.
There can be no assurance that the Company will be able to complete the development of the Mowana Mine on time
or on budget due to, among other things, changes in the economics, the scope of the pre-stripping and the size
of the open pit, delays in the delivery and installation of plant and cost overruns.
There can be no assurance that the current personnel, systems, procedures and controls will be adequate to
support the Company's operations. Should any of these events occur, it would have a material adverse effect on
the Company's business, financial condition, results of operations and prospects.
The capital and operating cost estimates for the Mowana Mine are estimates only and may not reflect the actual
capital and operating costs incurred by the Company.
There can be no assurance that final capital cost for the construction of the flotation concentrator and
related facilities at the Mowana Mine will not be greater than estimated. In addition, there can be no
assurance that the actual mining costs incurred by the Company will not be greater than estimated. Previous
capital and operating cost estimates include supplies and inputs, the cost of which the Company has little
control over. These include, but are not limited to, transportation and handling charges, the cost of fuel, the
cost of electricity, labour costs, reagent costs, smelter charges, the price of construction materials
including steel, and the cost of mining equipment and spares. A material increase in one or more of these
supplies and inputs may materially increase the actual capital and/or operating costs incurred by the Company.
Any material increase may cause the Mowana Mine to become economically unviable or delay the development of the
project, either of which would have a material adverse effect on the Company's business, financial condition,
results of operations and prospects.
No assurance can be given that additional capital, if required, will be available at all or available on terms
acceptable to the Company.
The Company may require additional financing (including a working capital facility) for the addition of a DMS
plant to the processing plant and to continue with the Matsitama exploration project. In addition, the Company
will require additional financing for the development of the underground portion of the mine at Mowana. Failure
to obtain such financing, and/or sufficient financing for continuing open pit operations, the exploration and
development of the Matsitama Exploration Project, or the underground project or any future projects, may result
in a suspension of operations or delay or indefinite postponement of exploration, development or production on
such properties or even a loss of a property interest. The Company's only sources of additional funds currently
available until the Mowana Mine reaches commercial production are its current cash balances, possible exercise
of share options, project finance alternatives including the Botswana Note and the equity markets. Additional
financing may not be available when needed or if available, the terms of such financing might not be favourable
to the Company and might involve substantial dilution to existing shareholders.
The Company may not obtain a working capital and hedging facility
There is no assurance that the Company will obtain the working capital and hedging facility as referred to in
the "Liquidity and Capital Resources" section of this MD&A. In addition, if a working capital facility is
established by the Company, or any similar debt or project financing is entered into by the Company, the
Company expects that lenders will require that the Company commit to: restrictive covenants regarding its
business and financial operations; hedge some or all of the production from the Mowana Mine; meet certain
financial tests during the term of the working capital facility; provide security over all or substantially all
of the assets of the Company, including its rights to the Mowana Mine and the proceeds of sales of copper
and/or copper concentrate mined from the Mowana Mine deposit; and restrict cash distributions by the Company
until such time as the principal amount of the working capital facility and related facilities, if any, is
repaid in full; each of which will have a restrictive impact on the ability of the Company to manage its
business, operations and cash flows, and will materially limit the Company's ability to pay dividends to
holders of ordinary shares. The failure of the Company to comply with any such restrictions may result in a
lender enforcing its security over the assets of the Company, which would have a material adverse impact on the
Company. Such restrictions, including any hedging programme, may also limit the Company's ability to benefit
from increases in the price of copper, which would have a material impact on the Company's cash flows and
results of operations.
Future production will be subject to the normal risks of mining operations
The Company's future mining operations are subject to all of the hazards and risks normally incidental to
exploration, development and the production of copper.
The Company's future mining activities may be subject to prolonged disruptions due to weather conditions,
hazards such as unusual or unexpected geologic formations, flooding or other conditions that may be encountered
in the drilling and removal of material. There may be a higher than normal risk of sourcing and hiring suitably
trained plant management, operating and maintenance staff and these people may not be readily available in
Botswana or not otherwise easily employed from within the Southern Africa region. This situation could also be
impacted by delays in obtaining necessary work and other labour permits to allow expatriate expertise to be
utilized to the extent necessary.
The Company's copper concentrate will require smelting, and such smelting capacity may not be available or may
adversely affect project economics
A portion of any production from the Mowana Mine is expected to be in the form of copper concentrate which
would be treated at third-party smelters. The availability of smelter capacity is not guaranteed and costs of
such treatment may adversely affect the economic viability of such production.
The Company relies on key personnel and its management team and outside contractors (including those in
Botswana), and the loss of one or more of these persons may adversely affect the Company
The Company's business is dependent on retaining the services of a small number of key personnel of the
appropriate calibre as the business develops. The Company has entered into employment agreements with certain
of its key executives. The success of the Company is, and will continue to be, to a significant extent,
dependent on the expertise and experience of the directors and senior management and the loss of one or more
could have a materially adverse effect on the Company.
The Company will rely heavily on sub-contractors to build, run and maintain the Mowana Mine. The failure of a
sub-contractor to perform properly its services to the Company could delay or frustrate mining operations, and
have a materially adverse effect on the Company.
Foreign investments and operations are subject to numerous risks associated with operating in foreign
jurisdictions
The Company conducts its operations through foreign subsidiaries, and substantially all of its assets are held
in such entities. Accordingly any limitation on the transfer of cash or other assets between the parent
corporation and such entities, or among such entities, could restrict the Company's ability to fund its
operations efficiently. Any such limitations, or the perception that such limitations may exist in the future,
could have a material and adverse impact on the Company's business, financial condition, and operations.
In addition, operating in foreign jurisdictions exposes the Company to the effects of political, economic or
other risks, including changes in foreign laws (whether arbitrary or not), expropriation or nationalization of
property, risks of loss due to civil strife, acts of war, insurrection or terrorism (including the effects of
such acts which occur in neighbouring states), cancellation or renegotiation of contracts or the inability to
enforce legal rights in the foreign jurisdiction.
Government regulations may have an adverse effect on the Company
The Company, its subsidiaries, its business and its operations are subject to various laws and regulations. The
costs associated with compliance with such laws and regulations may cause substantial delays and require
significant cash and financial expenditure, which may have a material adverse effect on the Company's business,
financial condition, results of operations, and prospects and, in particular, the development of the Mowana
Mine.
The Company's operations and its ability to hold various mineral rights require licences, permits and
authorizations and, in some cases, renewals of existing licences, permits and authorisations from various
governmental and quasi-governmental authorities. The Company believes that it currently holds or has applied
for all necessary licences, permits and authorisations to carry on the activities that it is currently
conducting and to hold the mineral rights it currently holds under applicable laws and regulations in effect at
the present time, and also believes that it is complying in all material respects with the terms of such
licences, permits and authorisations. However, the Company's ability to obtain, sustain or renew such licences,
permits and authorisations on acceptable terms is subject to changes in regulations and policies and to the
discretion of the applicable governmental and quasigovernmental bodies and there can be no assurance that the
Company will be able to obtain, sustain or renew any such licences, permits or authorisations on acceptable
terms or at all.
Currency fluctuations may adversely affect the costs that the Company incurs in its operations
Copper is sold throughout the world, principally in US Dollars. The Company's costs are incurred primarily in
Botswana Pula, and to a lesser extent in British Pounds Sterling, South African Rand and Canadian Dollars.
Changes in the currency exchange rates of the US Dollar against the any of these currencies may affect the
actual capital and operating costs of the Projects and will affect the results presented in the Company's
financial statements and cause its financial position to fluctuate. As well, such fluctuations may affect the
cash flow that the Company hopes to realise from its operations. Accordingly, the Company will be exposed to
exchange rate fluctuations which could have a material adverse effect on the Company's business, financial
condition, results of operations and prospects.
Further, there is no guarantee that the Government of Botswana will not impose restrictions on the
convertibility of and obligations to remit and convert to local currency in future. Such fluctuations in
foreign currency or restrictions on the convertibility of and obligations to remit and convert to the currency
of Botswana could have a material adverse effect on the Company's business, financial condition, results of
operations and prospects.
The prevalence of HIV/AIDS in Botswana may adversely impact the Company's proposed mining operations
The per capita incidence of the HIV/AIDS virus in Botswana has been estimated as being one of the highest in
the world, according to public sources. As such, HIV/AIDS remains the major healthcare challenge faced by
Botswana and the Company's operations in the country. If the number of new HIV/AIDS infections in Botswana
continues to increase and if the Government of Botswana imposes more stringent obligations on employers related
to HIV/AIDS prevention and treatment, the Company's operations in Botswana and its profitability and financial
condition could be adversely affected.
Insurance and uninsured risks
Although the Company maintains liability insurance against certain risks in an amount that it considers
consistent with industry practice for a corporation in the development stage, the nature of these risks is such
that liabilities could exceed policy limits or could be excluded from coverage, in which event the Company
could incur significant costs that could have a material adverse effect upon the Company's business, financial
condition and/or results of operation. As well, there are risks against which the Company cannot insure or
against which it may elect not to insure. The potential costs that could be associated with any liabilities not
covered by insurance which may be taken out or in excess of insurance coverage may cause substantial delays and
require significant capital outlays, adversely affecting the Company's financial condition and/or results of
operation.
The Company will require significant additional insurance to cover operating risks, as applicable. There can be
no assurance that such insurance will be available or that the terms and costs of such insurance will not
adversely affect the anticipated profitability of the Mowana Mine and, therefore, the Company's business,
financial condition and/or results of operation.
The Company has no operating history and a history of losses and there can be no assurance that the Company
will ever be profitable
The Company has no mineral properties from which any ore has ever been extracted and sold and its ultimate
success will depend on its ability to generate cash flow from producing properties in the future. The Company
has not earned profits to date and there is no assurance that it will do so in the future.
The success of current and future exploration activities cannot be assured
The exploration and development of mineral deposits involves significant financial risks over a prolonged
period of time, which even a combination of careful evaluation, experience and knowledge cannot eliminate.
While discovery of a mineral structure may result in substantial rewards, few properties which are explored are
ultimately developed into producing mines. Major expenditure may be required to establish mineral reserves by
drilling and to construct mining and processing facilities at a site. It is impossible to ensure that pre-
feasibility studies or full feasibility studies on the projects or the current or proposed exploration
programmes for the Projects will ever result in the discovery of an economically viable mineral deposit or in a
profitable commercial mining operation.
Whether a copper deposit will be commercially viable depends on a number of factors, some of which are the
particular attributes of the deposit, such as its size and grade, proximity to infrastructure, financing costs
and governmental regulations, including regulations relating to prices, taxes, royalties, infrastructure, land
use, importing and exporting of copper and environmental protection. The effect of these factors cannot be
accurately predicted, but the combination of these factors may result in the Projects not being, or ceasing to
be, viable, which would have a material adverse effect on the Company's business, financial condition, results
of operations and prospects.
The Company may not be able to effectively manage its growth
The Company's ability to support the anticipated growth of its business will be substantially dependent upon,
among other things, it successfully increasing and applying additional resources to support its activities.
There is no assurance that the Company will be able to manage any future expansion successfully, and any
inability to do so would have a material adverse effect on the Company.
FINANCIAL INSTRUMENTS
The Company uses copper put contracts to manage financial risks associated with its underlying business
activities. On 18 May 2007, the Company bought copper put contracts for a total of 5,850 tonnes of copper at a
strike price of US$3.00/lb divided evenly over the period April 2008 to December 2008. These contracts are
intended to provide the Company with protection against the possibility of declining copper prices over the
critical planned start-up period of the Mowana Mine during 2008. These contracts do not cap the price at which
the Company can sell its copper production and there are no margin calls associated with this position. The
Company realized a non-cash hedging loss of Pounds Sterling 406,231 during fiscal 2007 on put contracts settled
prior to the anticipated start of commercial production as these contracts ceased to be classified as effective
hedges. Accordingly, the non-cash losses on the April, May and June 2008 put contracts were expensed in the
Consolidated Profit and Loss Statement.
The Company's financial instruments consist of cash and cash equivalents, receivables, payables and accrued
liabilities, some of which are denominated in Sterling, Pula, and Rand, United States dollars and Canadian
dollars. These accounts are recorded at cost which approximates their fair value at each reporting period end
value in Sterling. The Company experiences financial gains or losses on these accounts as a result of foreign
exchange movements against Sterling. The Company is exposed to currency risk related to the exploration and
development expenditures on its Mowana and Matsitama projects since it settles the majority of these
expenditures either in local currency Pula or Rand. These expenditures are negatively impacted by increases in
value of either Pula or Rand versus Sterling. As mine development costs are incurred and purchase commitments
made for the development of the Mowana Mine in 2008, the Company may acquire Pula and Rand or use derivative
positions to lock in these costs in Sterling, if it believes it prudent to do so.
The Company has placed its cash and cash equivalents in short-term liquid deposits or investments which provide
a revised rate of interest upon maturity.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Disclosure controls and procedures are designed to provide reasonable assurance that all material information
relating to the Company, including its consolidated subsidiaries, is gathered and reported to senior
management, including the Company's Chief Executive Officer and Chief Financial Officer, on a timely basis so
that appropriate decisions can be made regarding public disclosure. As at the end of the period covered by this
MD&A, management of the Company, with the participation of the Chief Executive Officer and the Chief Financial
Officer, evaluated the effectiveness of the Company's disclosure controls and procedures as required by
Canadian securities laws. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer
have concluded that, as of the end of the period covered by this MD&A, the disclosure controls and procedures
were effective to provide reasonable assurance that information required to be disclosed in the Company's
annual filings and interim filings (as such terms are defined under Multilateral Instrument 52-109-
Certification of Disclosure in Issuers' Annual and Interim Filings of the Canadian Securities Administrators)
and other reports filed or submitted under Canadian securities laws is recorded, processed, summarized and
reported within the time periods specified by those laws and that material information is accumulated and
communicated to management of the Company, including the Chief Executive Officer and the Chief Financial
Officer, as appropriate to allow timely decisions regarding required disclosure .
DISCLOSURE OF OUTSTANDING SHARE DATA
The following details the share capital structure as of the date of this MD&A.
/T/
Expiry date Exercise price Number Number
Common shares
Share purchase options 23 Sept- Pounds 146,858,957
ember 2014 Sterling 0.35 500,000
12 Nov- Pounds
ember 2014 Sterling 0.76 675,000
5 Jan- Pounds
uary 2015 Sterling 0.76 1,500,000
14 March Pounds
2015 Sterling 0.76 90,000
12 Nov- Pounds
ember 2015 Sterling 0.76 240,000
1 Aug- Pounds
ust 2016 Sterling 0.775 6,860,000
11 Sept- Pounds
ember 2016 Sterling 0.775 400,000
30 Nov- Pounds
ember 2016 Sterling 0.775 200,000
29 Dec- Pounds
ember 2016 Sterling 0.775 750,000 11,215,000
/T/
FORWARD-LOOKING STATEMENTS
This MD&A contains "forward-looking information". Forward-looking information includes, but is not limited to,
statements concerning mineral resource estimates, information with respect to the future price of copper, bank
interest receivables, the exploration budget for Matsitama, results of mining operations, mining extraction and
recovery rates at the Mowana Mine Project, estimates of production of copper at the Mowana Mine Project,
including the anticipated production profile for the first five years of mining, the potential for future
expansion of the Mowana Mine Project, estimations of the life of the Mowana Mine Project, the expected levels
of ore on the stockpiles at the Mowana Mine Project, expected timing of the commissioning of the process plant,
the expected success of exploration activities under the open pit at the Mowana Mine Project and in the
Matsitama Belt, use of Mineral Resources underground at the Mowana Mine Project to supplement open-pit feed,
the merit of an underground mine at the Mowana Mine Project, Botswana's energy self-sufficiency, the potential
of the Thakadu deposits, government regulation of mining operations and exploration, availability of working
capital facility and project finance for the underground project at the Mowana Mine Project, expected number of
employees and staff at the time of commercial production, expectations concerning the timing of concentrate,
the timing of the completion of construction at the Mowana Mine project and hand-over from EPCM teams to
operational teams, plans concerning the evaluation of mineral resource potential to the south of the open pit
at the Mowana Mine Project, the use of derivative positions and the impact of exchange rates and other
statements which are not historical facts.
In certain cases, forward-looking information can be identified by the use of words such as "plans", "expects"
or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates"
or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions,
events or results "may", "could", "would", "should", "might" or "will be taken", "occur" or "be achieved" and
include the negative variation of such phrases.
With respect to forward-looking information contained in this MD&A, the Company has made assumptions regarding,
among other things, the Company's ability to generate sufficient cash flow from operations and access existing
credit facilities and capital markets to meet its future obligations, the regulatory framework in Botswana with
respect to, among other things, permits, licenses, authorizations, royalties, taxes and environmental matters,
and the Company's ability to obtain qualified staff and equipment in a timely and cost-efficient manner to meet
the Company's demand.
Although the Company believes that its expectations reflected in forward-looking information are reasonable,
such forward-looking information involves known and unknown risks, uncertainties and other factors that may
cause the actual results, performance or achievements of the Company or the Company's projects in Botswana, or
any of them, to be materially different from any future results, performance or achievements expressed or
implied by the forward-looking information. Such factors include, risks related to failure to convert estimated
mineral resources to reserves, conclusions of economic evaluations, changes in project parameters as plans
continue to be refined, future prices of copper, unexpected increases in capital or operating costs, possible
variations in mineral resources, grade or recovery rates, failure of equipment or processes to operate as
anticipated, accidents, labour disputes and other risks of the mining industry, delays in obtaining
governmental consents, permits, licences and registrations or financing or in the completion of development or
construction activities, political risks arising from operating in Africa, uncertainties relating to the
availability and costs and availability of financing needed in the future, changes in equity markets,
inflation, changes in exchange rates, fluctuations in commodity prices and uninsured risks, as well as those
factors discussed under "Risks" in this MD&A.
Although the Company has attempted to identify important factors that could cause actual actions, events or
results to differ materially from those described in forward-looking information, there may be other factors
that cause actions, events or results not to be as anticipated, estimated or intended. There can be no
assurance that forward-looking information will prove to be accurate, as actual results and future events could
differ materially from those anticipated in such information. Accordingly, readers should not place undue
reliance on forward-looking information. The forward-looking information contained herein, unless stated
otherwise, is made as of the date of this MD&A and the Company makes no responsibility to update them or to
revise them to reflect new events or circumstances, except as required by law.
The mineral resource and mineral reserve figures referred to in this MD&A are estimates and no assurances can
be given that the indicated levels of minerals will be produced. Such estimates are expressions of judgment
based on knowledge, mining experience, analysis of drilling results and industry practices. Valid estimates
made at a given time may significantly change when new information becomes available. While the Company
believes that the resource and reserve estimates referred to in this MD&A are well established, by their nature
resource and reserve estimates are imprecise and depend, to a certain extent, upon statistical inferences which
may ultimately prove unreliable. If such estimates are inaccurate or are reduced in the future, this could have
a material adverse impact on the Company. Due to the uncertainty that may be attached to inferred mineral
resources, it cannot be assumed that all or any part of an inferred mineral resource will be upgraded to an
indicated or measured mineral resource as a result of continued exploration.
Additional information about the risks and uncertainties of the Company's business is provided in its
disclosure materials, including its Annual Information Form, available under the Company's profile on SEDAR at
www.sedar.com.
A conference call will be held on April 1, 2008 at 8 a.m. EST or 1 pm London time. To join us by telephone,
please dial 416-695-9753 five minutes prior to the start time. Toll free numbers are available for North
American callers at 1-888-789-0150 and UK callers at (00)-800-4222-8835. In addition, it is possible to listen
to the teleconference and view the slide presentation from our website http://www.africancopper.com in the
Investors/Conference Calls.
-30-
FOR FURTHER INFORMATION PLEASE CONTACT:
African Copper Plc
Marguerite Manshreck-Head
(416) 214-2922
Email: info@africancopper.com
Website: www.africancopper.com
OR
Numis Securities Limited (NOMAD)
John Harrison / James Black
+44 (0) 20 7260 1000
-0-
African Copper PLC
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