required,
since on top of N'Kana's requirements and those of the Roan and
Mufulira, the mines in the N'Changa district have to be developed and
equipped. It is not possible to give a figure for the latter, but I
hazard the suggestion that it will not fall short of £5,000,000. The
reason for this is that there would appear to be good ground for
assuming that provision would have to be made for the treatment of the
mixed ores and not merely for the sulphide ores. Should this prove to
be the case the plant will be more expensive than that required for the
treatment of the sulphides alone, and might even involve the
installation of an electrolytic unit, which is notoriously costly. For
a development property to raise so high a sum might be found to present
very great difficulties. At any rate, it is certain that it would not
be an easy task, particularly if it were desired, as it naturally would
be, to prevent the watering down of the'present shareholders' equity in
the company. I would especially emphasize that the problem is greater
when a company is only developing its assets. Where a company is in
receipt of a steady income it is much easier to finance by way of loan
or debentures, which is a much more satisfactory way of financing than
by issuing shares continually. If a company has one operating property
which is making profits, it constitutes security for any loan or
debentures raised in respect of funds required to develop and equip a
second property. The establishment of a company such as I have
suggested would create such a position so far as the financing of the
R.C.B.C.-N'Changa plant is concerned, because by the time sufficient
knowledge has been gained to permit of the designing and ordering of
the plant, production at N'Kana should have started. In making this
statement I am assuming that two years must elapse before these
deposits will have been sufficiently opened up to enable large scale
tests to be conducted. In any case, by the time R.C.B.C. is incurring
heavy expenditure, N'Kana should be getting into its stride and the
profits that may be confidently anticipated would provide such an
excellent background for a loan or debentures that these could be
arranged on much more advantageous terms than would otherwise be the
case.
The
foregoing reasons,- in my opinion, present a very forcible argument in
favour of consideration being given to the scheme for establishment of
a company to take over the property and interests of the three
companies mentioned.
The
details of such a scheme, of course, would have to be the subject of
careful consideration, but I would be very glad if you could consider
this letter and the principle underlying my ideas. Perhaps, after you
have had an opportunity of studying this letter we might have a talk on
the subject.
