Shares in copper producer 29 Metals fall again after Queensland flooding highlights debt levels

Debt is on the agenda for 29 Metals as the company looks to get its Queensland copper mine back in production.

Shares in copper and base metals producer 29 Metals took a hit on Tuesday as the company confirmed it had been forced to seek relief from the company’s bankers after its North Queensland mine was washed out in March flooding.

The miner, which floated in 2021 at $2 a share, is still trying to restart its Capricorn copper mine in Queensland after the flooding, with the company saying it was still on track to begin operations by mid-August.

Originally tipped to produce 19,000 to 23,000 tonnes of copper in 2023, 29 Metals now says the mine will produce up to 9,000 tonnes of copper for the full year.

The flooding has cost the company dearly, as 29 Metals quarterly revenue tumbled 39 per cent, or $64m, to $100m for the period. The Capricorn outage made up $45m of that total, the company said, with the company spending $28m on returning the mine to production.

That loss of revenue, and associated costs, also forced the company to seek relief from debt covenants with its lenders, the company said, while it waits for an insurance payment after the Queensland disaster.

“Covenant relief was secured from 29 Metals’ lenders during the quarter in relation to the Company’s loan facilities at 30 Jun 2023, with consideration of impact of the extreme weather event at Capricorn Copper,” the company said.

29 Metals is seekomh banking relief following copper mine outage.

29 Metals finished June with $129m in cash and equivalents, down from $163m at the end of March, but is also carrying debt of $166m after paying $US6m off its main lending facilities and drawing down a $US40m revolving capital line in the quarter.

Managing director Peter Albert told analysts the company had now fully drawn down all of its available debt facilities.

Mr Albert said the company was in close contact with its insurers, and had provided all the information needed for the assessment of its claims, and was hopeful it could win support for an early damage and business interruption payment as the company looks to get its year back on track.

But falling commodity prices – particularly zinc – also hit its Golden Grove operations in WA, with 29 Metals saying the mine had a $5m operating cash outflow for the period.

Total production at Golden Grove will need to lift in the second half of 2023 for 29 Metals to hit guidance. Output at the mine lifted in the June quarter, with copper production up 1000 tonnes to 4200 tonnes compared to the March period, and zinc output up 54 per cent to 13,400 tonnes.

But the mine has produced a total of 7400 tonnes of copper and 22,100 tonnes of zinc for the half-year to the end of June, well short of the halfway mark of annual guidance of 17,000 to 20,000 tonnes of copper and 54,000 to 61,000 tonnes of zinc.

29 Metals shares were down 5.5 per cent to 71.5c on Tuesday afternoon.