Katanga Mining announced on Friday it has secured $635.5 million in new loan facilities from parent Glencore International to fund the expansion of its Democratic Republic of Congo copper-cobalt mine. The Toronto-listed firm wants to bump copper production to 270,000 tonnes per annum and thereafter bump it up to 310,000 tonnes from cash flow.
The company is already ramping up copper production with financials results also out on Friday showing year to date copper in ore mined was 157,658 tonnes, a 96% increase over 2010. Cobalt produced fell 30% to 593 tonnes, but that was in line with expectations. Katanga says with the expansion the DRC complex it could become Africa’s largest producer of copper and the world’s number one cobalt mine.
Press Release:
ZUG, SWITZERLAND, Nov. 11, 2011 /CNW/ – Katanga Mining Limited (TSX: KAT; KAT.NT) (“Katanga” or the “Company”) today announced the following:
Highlights during the three months (“Q3”) ended September 30, 2011
Mining
Processing
Financial
Human Resources and Corporate
Updated Phase 4 Expansion of Katanga’s copper cobalt project
Consistent with Katanga’s completion of the Phase 3 expansion of its project described in the Technical Report, Katanga commissioned a front end engineering and early works report (the “Early Works Report“). The Early Works Report identified the following (collectively, the “Updated Phase 4 Expansion“):
Commitment for up to $635.5 million in New Loan Facilities
Katanga has received the Commitment from Glencore, or one of its Group entities, to provide Katanga with new loan facilities of up to $635.5 million (the “Facilities“). Up to $120 million of the Commitment is being provided to Katanga as a new term loan facility (the “Term Loan“) to enable the refinancing of Katanga’s outstanding Canadian $115 million 14% debentures due November 30, 2013 in accordance with the provisions of Katanga’s trust indenture datedNovember 20, 2006. The balance of the Commitment is being provided to Katanga as a senior secured credit facility (the “Senior Facility“) to fund the Updated Phase 4 Expansion not covered by the Company’s cash flows. The Company’s 75% interest in Kamoto Copper Company SARL (which holds the copper and cobalt project assets) will be pledged as security for the Senior Facility along with certain other assets of the Company and its subsidiaries. As security for the Term Loan and additional security for the Senior Facility, Katanga will agree, if a Facility is in default, to complete a deeply discounted rights offering with Glencore providing a standby commitment, to repay the Facility. In the case of the Senior Facility, Glencore has agreed to exercise its right to compel Katanga to complete the deeply discounted rights offering prior to realizing on Glencore’s other security.
The Facilities will mature on December 31, 2014 and interest will be payable on any amount drawn under the Facilities at a rate of 10% per annum. The Commitment and the Facilities are subject to, among other things, final documentation being agreed and usual and customary drawdown conditions being satisfied.
In addition to the benefits to Katanga of the Updated Phase 4 Expansion, which the Facilities are expected to finance in part, Katanga expects the Updated Phase 4 Expansion will improve copper recovery, utilize existing under-utilized plant capacity, and allow Katanga to produce LME Grade A copper and benefit from the continuity of personnel and competencies involved in the recently completed Phase 3 expansion of its project.
Katanga’s Corporate Governance and Nominations Committee (the “Committee“), which is comprised of three independent directors, has reviewed the proposed Facilities as contemplated by the Charter of the Committee. The Committee retained Fasken Martineau DuMoulin LLP, independent legal counsel, in connection with that review. Following that review, the Committee has unanimously determined that entering into the Facilities is in the best interests of Katanga.
Glencore beneficially owns, directly or indirectly, or exercises control or direction over approximately 74% of the issued and outstanding common shares of Katanga. Due to this relationship, the Facilities are considered “related party transactions” as defined by Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101“). Katanga is relying upon the exemption from the requirement to obtain majority of minority shareholder approval available under MI 61-101 as it has determined that neither the aggregate of the fair market value of the Facilities, nor the fair market value of the consideration for the Facilities, exceeds 25% of Katanga’s market capitalization as calculated and determined in accordance with MI 61-101. It is not anticipated that the Facilities will affect the percentage of Katanga’s securities beneficially owned or controlled by Glencore.
Glencore has made the Facilities available in the ordinary course of its business. It may from time to time acquire additional securities of Katanga, dispose of some or all of the existing or additional securities it holds or will hold, or may continue to hold its current position.
About Katanga Mining Limited
Katanga Mining Limited operates a major mine complex in the Democratic Republic of Congo producing refined copper and cobalt. The Company has the potential to become Africa’s largest copper producer and the world’s largest cobalt producer. Katanga is listed on the Toronto Stock Exchange under the symbol KAT. All dollar amounts are in United States dollars unless otherwise indicated.