Octagon sees PN17 exit in FY15

KUALA LUMPUR: Octagon Consolidated Bhd's copper mining business in Australia is expected to help the company return to the black and exit its Practice Note 17 (PN17) status in the financial year ending Oct 31, 2015 onwards, its managing director and CEO Mazlan Ali said.
"The company will benefit from an earnings before interest, taxes, depreciation and amortisation (ebitda) of at least RM50 million in the first two years of operations (2015 and 2016), and there will be 50-50 sharing of profit after tax between Octagon and our partner from 2017 onwards," he told reporters after its AGM here yesterday.
In October, Octagon agreed with Malaco Mining Sdn Bhd and subsidiary Malaco Leichhardt Pty Ltd to jointly develop the Leichhardt copper project in Queensland.
Octagon hopes to complete its restructuring exercise and with the joint development agreement (JDA) and operating agreement (OA) with its partner this year.
Under the JDA, Octagon is granted the rights to jointly develop the Leichardt Copper Project with Malaco Mining in relation to copper oxide and transition ore in Mount Watson.
Through the OA with Malaco Leichhardt, Octagon shall be exclusively appointed to carry out the operations related to the mining, extraction of copper oxide and transition ore and production of copper cathodes from the Mount Watson tenement through the exclusive use of the process plant and infrastructure at Mount Cuthbert, which has a capacity of 9,500 tonnes per year.
In addition, offtake arrangement has been secured by Malaco Leichardt with Glencore International AG through which grade A copper cathodes produced by Octagon will be sold.
"This will be the future business for Octagon. The copper mining is already in operations, which commence production in February 2014. We've a long term contract of 10 years in terms of selling grade A copper to Glencore, one of the largest trading companies in minerals and resources," said Mazlan.
He said the execution of the agreements will convert Octagon into copper player and that the prospect of copper mining is bright because of the long term contract and the ability to get profit.
"It is new for us but the existing expertise of our partners will remain to operate the plant. We have the benefit of teaming up with them for this project and at the same time we will hire experts in the copper mining field to operate the mine for us," said Mazlan.
Octagon was classified as PN17 on June 8, 2012 and had propsed a regularisation plan that includes the new business stream in copper mining operations, amomg others.
"From a total debt of RM295 million, we now need to pay RM41.66 million and the rest is waived as per the agreements signed with financial creditors and institutional creditors," said Mazlan.