Chinese company Cathay Fortune has proposed to buy out Botswana-focused copper miner Discovery Metals if the miner halts a planned equity raising, Mining Weekly reported. Australian-listed Discovery would seek to raise AUD 75mn (EUR 59mn) through a share placement worth AUD 25mn and AUD 50mn offering to existing shareholders.

That move would be a “serious mistake”, according to Cathay, which is Discovery’s second biggest shareholder with a 13.7% stake. Cathay believes that if Discovery progresses with the current financing arrangements, it is likely that it may be forced into receivership in the near future.

Last month, Discovery said it was finalising plans for debt capital markets issuance to raise between USD 200mn and USD 250mn to replace existing project linked debt. According to Cathay, it would be very difficult for Discovery, which has failed continuously to generate positive cash flow, to successfully issue bonds at a reasonable cost, given the current status and outlook of the commodity and capital markets. It added that even in case that bond issuance was successful, the funds would run out quickly under the current continuous significant negative cash flow situation.

Cathay, owned by Chinese billionaire Yu Yong, instead suggested to make a quick due diligence and to propose a binding cash proposal for Discovery in no more than 10 days. It gave Discovery a deadline of April 26 to consider the proposal.

In February, Cathay and its bidding partner China-Africa Development Fund abandoned an AUD 824mn hostile bid for Discovery, offering AUD 1.70 a share, over concerns about the company’s key Boseto copper asset in north-west Botswana. Discovery’s shares last traded at 34 cents on April 18 and the company has since been in a trading halt pending a statement on its financing.

Discovery Metals produces copper and silver concentrate from its 100% owned Boseto mine. It is evaluating a number of Boseto expansion scenarios, including a plan to increase the life of the mine from 15 to 25 years and increase copper production from 36,000 to 50,000 tonnes per year.