ZUG, SWITZERLAND, Feb. 20, 2019 /CNW/ - Katanga Mining Limited
(TSX: KAT) ("Katanga" or the "Company") today announces its
financial results for the fourth quarter and 2018 fiscal year.
Katanga's Financial Statements and Management's Discussion and
Analysis ("MD&A") will be available on SEDAR,
www.sedar.com.
Operating Results
|
|
Three months
ended
|
Year
ended
|
|
|
|
|
|
|
|
|
|
Dec
31,
2018
|
Sep 30,
2018
|
Dec 31,
2017
|
Dec
31,
2018
|
Dec 31,
2017
|
Sales
|
$'000
|
344,708
|
428,116
|
7,696
|
1,265,094
|
25,292
|
Mining, processing
and other costs (net of changes
in metal stocks)*
|
$'000
|
(320,726)
|
(220,282)
|
(4,289)
|
(773,331)
|
(31,839)
|
Royalties and
transportation costs*
|
$'000
|
(54,326)
|
(73,704)
|
-
|
(201,682)
|
-
|
Depreciation and
amortization*
|
$'000
|
(85,721)
|
(74,955)
|
-
|
(276,638)
|
-
|
Gross (loss)
profit
|
$'000
|
(116,065)
|
59,175
|
3,407
|
13,443
|
(6,547)
|
|
|
|
|
|
|
|
Operating
expenses*
|
|
-
|
-
|
(190,028)
|
-
|
(420,034)
|
Other
expenses
|
$'000
|
(14,456)
|
(738)
|
(6,266)
|
(24,651)
|
(9,401)
|
Write-offs / loss on
disposal of property, plant
and equipment
|
$'000
|
(8,088)
|
(32,678)
|
(749)
|
(50,237)
|
(3,042)
|
Property, plant and
equipment impairment
|
|
-
|
-
|
(25,148)
|
-
|
(25,148)
|
Net finance
costs
|
$'000
|
(111,762)
|
(102,244)
|
(103,588)
|
(461,450)
|
(387,015)
|
Restructuring
expenses**
|
$'000
|
-
|
-
|
-
|
(248,128)
|
-
|
Fines and
penalties***
|
|
(22,248)
|
-
|
-
|
(22,248)
|
-
|
Income tax
expense
|
$'000
|
(3,557)
|
(9,383)
|
(1,197)
|
(12,940)
|
(1,487)
|
Net loss and
comprehensive
loss
|
$'000
|
(276,176)
|
(85,868)
|
(323,569)
|
(806,211)
|
(852,674)
|
|
|
|
|
|
|
|
Non-controlling
interests
|
$'000
|
(48,718)
|
(7,361)
|
(92,912)
|
(97,775)
|
(279,178)
|
Attributable
to
shareholders of the company
|
$'000
|
(227,458)
|
(78,507)
|
(230,657)
|
(708,436)
|
(573,496)
|
|
|
|
|
|
|
|
Adjusted
EBITDA****
|
$'000
|
(52,888)
|
100,714
|
(187,587)
|
215,193
|
(382,748)
|
|
|
|
|
|
|
|
Basic and diluted
loss per common share
|
$/share
|
(0.12)
|
(0.04)
|
(0.12)
|
(0.37)
|
(0.30)
|
C1
costs*****
|
$/lb
|
2.53
|
0.94
|
nm
|
1.79
|
nm
|
|
|
*
|
Since the resumption
of production, expenses previously disclosed in operating expenses
have been reclassified to cost of sales.
|
**
|
For further
information, refer to item 9 of the Company's MD&A, available
on SEDAR at www.sedar.com under 'Restructuring
expenses'.
|
***
|
For further
information, refer to item 2 of the Company's MD&A under
'Restatement of Historical Financial Statements filed in 2017 and
OSC Settlement'.
|
****
|
The aggregation of
sales, cost of sales (less depreciation), operating expenses,
general and administrative expenses, loss on disposal and
write-offs of property, plant and equipment and foreign exchange
gains and losses are included within adjusted EBITDA (Refer to item
22 'Non-IFRS financial measures').
|
*****
|
For further
information, refer to item 21 of the Company's MD&A under
'Non-IFRS financial measures'.
|
|
|
Three months
ended
|
Year
ended
|
|
|
|
|
|
|
|
|
|
Dec
31,
2018
|
Sep 30,
2018
|
Dec 31,
2017
|
Dec
31,
2018
|
Dec 31,
2017
|
Copper
revenue
|
$'000
|
270,765
|
246,289
|
3,172
|
867,917
|
3,006
|
Cobalt
revenue
|
$'000
|
73,943
|
181,827
|
-
|
396,914
|
-
|
Concentrate
revenue
|
$'000
|
-
|
-
|
4,524
|
263
|
22,286
|
Total
revenue
|
$'000
|
344,708
|
428,116
|
7,696
|
1,265,094
|
25,292
|
Including net
provisional
pricing adjustment
|
|
(10,012)
|
5,585
|
265
|
(4,318)
|
265
|
|
|
|
|
|
|
|
Copper cathode
sold
|
tonnes
|
48,686
|
43,596
|
451
|
145,743
|
451
|
Cobalt contained in
hydroxide
sold
|
tonnes
|
1,430
|
3,737
|
-
|
7,343
|
-
|
Copper contained in
concentrate
sold
|
tonnes
|
-
|
-
|
1,915
|
73
|
8,608
|
|
|
|
|
|
|
|
LME average copper
price
|
$/lb
|
2.80
|
2.77
|
3.08
|
2.96
|
2.88
|
Realized copper
price(1)
|
$/lb
|
2.10
|
2.03
|
2.66
|
2.23
|
2.66
|
MB average cobalt
price
|
$/lb
|
31.68
|
34.65
|
30.62
|
36.79
|
25.81
|
|
|
(1)
|
Realized copper
prices are based on gross copper revenue (above) after deducting
realization charges, royalties and other selling
expenses.
|
The movement in revenue is due to the following price and
volume factors:
- Copper revenue increased to $270.8
million in Q4 2018 from $246.3
million in Q3 2018. Copper revenue increased to $867.9 million in 2018 from $3.0 million in 2017. Cobalt revenue decreased to
$73.9 million in Q4 2018 from,
$181.8 million in Q3 2018. Cobalt
revenue increased to $396.9 million
in 2018 from $nil in 2017. The increase in copper revenue in both
periods and the increase in cobalt revenue in 2018 compared to 2017
are due to the resumption of production in December 2017 following the completion of phase 1
of the whole ore leach project ("WOL Project") and the ongoing
ramp-up of production in 2018. The decrease in cobalt revenue in Q4
2018 compared to Q3 2018 is due to the temporary suspension of
cobalt sales.
- Included in sales is a net provisional pricing adjustment
resulting from movements in the commodity price between the date of
sale and the final pricing based on average prices for a specified
period thereafter. At each reporting date, provisionally priced
sales that have not been finalized retain an exposure to future
changes in prices and are marked-to-market based on London Metal
Exchange ("LME") and Metal Bulletin ("MB") forward prices. These
adjustments were recorded in sales in the statement of loss and
comprehensive loss and within receivables on the statement of
financial position.
The movement in cost of sales and operating expenses is due to
the considerations detailed in the table below:
|
|
Three months
ended
|
Year
ended
|
|
|
|
|
|
|
Dec 31,
2018
|
Sep 30,
2018
|
Dec 31,
2017
|
Dec
31,
2018
|
Dec 31,
2017
|
Open pit mining
costs
|
$'000
|
37,283
|
29,550
|
-
|
116,985
|
-
|
Underground mining
costs
|
$'000
|
14,003
|
14,361
|
-
|
51,107
|
-
|
KTC processing
costs
|
$'000
|
28,533
|
21,902
|
-
|
81,260
|
-
|
Luilu refinery
costs
|
$'000
|
113,937
|
83,330
|
-
|
300,736
|
-
|
Change in metal
stock
|
$'000
|
11,806
|
13,371
|
4,289
|
(63,355)
|
31,839
|
Mine infrastructure
and support costs
|
$'000
|
114,544
|
57,357
|
-
|
283,494
|
-
|
Expense on issue of
capital spares to production
|
$'000
|
620
|
411
|
-
|
3,104
|
-
|
Depreciation
|
$'000
|
85,721
|
74,955
|
-
|
276,638
|
-
|
Royalties and
transportation costs
|
$'000
|
54,326
|
73,704
|
-
|
201,682
|
-
|
Total cost of
sales
|
$'000
|
460,773
|
368,941
|
4,289
|
1,251,651
|
31,839
|
|
|
|
|
|
|
|
Open pit mining care
and maintenance costs
|
$'000
|
-
|
-
|
15,812
|
-
|
49,447
|
Underground mining
care and maintenance costs
|
$'000
|
-
|
-
|
8,595
|
-
|
28,479
|
KTC processing care
and maintenance costs
|
$'000
|
-
|
-
|
10,882
|
-
|
33,043
|
Luilu refinery care
and maintenance costs
|
$'000
|
-
|
-
|
10,064
|
-
|
20,778
|
Mine infrastructure
and support care and maintenance costs
|
$'000
|
-
|
-
|
110,914
|
-
|
193,565
|
Expense on issue of
capital spares to production
|
$'000
|
-
|
-
|
1,479
|
-
|
9,662
|
Depreciation
|
$'000
|
-
|
-
|
31,197
|
-
|
81,424
|
Royalties and
transportation costs
|
$'000
|
-
|
-
|
1,085
|
-
|
3,636
|
Total operating
expenses
|
$'000
|
-
|
-
|
190,028
|
-
|
420,034
|
Review of Q4 2018 Expenses
- A gross loss was incurred of $116.1
million in Q4 2018 compared to a gross profit of
$59.2 million in Q3 2018. The gross
loss is driven by lower revenue due to the temporary suspension of
cobalt sales, increased reagent costs at the Luilu metallurgical
plant and increased mine infrastructure and support costs. This was
offset by an increase in copper sales in the quarter;
- Open pit mining costs increased to $37.3
million in Q4 2018 from $29.6
million in Q3 2018. The increase in open pit mining costs is
due to increased maintenance activity surrounding the ongoing
ramp-up of production;
- KTC processing costs increased to $28.5
million in Q4 2018 from $21.9
million in Q3 2018. KTC processing costs have increased due
to the increase in total material milled and processed, in line
with the optimized mine plan;
- Luilu refinery costs increased to $113.9
million in Q4 2018 from $83.3
million in Q3 2018. Luilu refinery costs have increased due
to increased reagent costs and an increase in total oxide feed from
KTC, in line with the optimized mine plan;
- Mine infrastructure and support costs increased to $114.5 million in Q4 2018 from $57.4 million in Q3 2018. The increase in mine
infrastructure and support costs is driven by an increase in
provisions relating to slow moving stock, an increase in provisions
for other receivables and increased support costs for site
activities following the ongoing ramp-up of production; and
- Royalties and transportation costs decreased to $54.3 million in Q4 2018 from $73.7 million in Q3 2018. Royalties and
transportation costs have decreased due to the temporary suspension
of cobalt sales.
Review of 2018 Full Year Expenses
- Gross profit increased to $13.4
million in 2018 from a $6.5
million gross loss in 2017. The increase in gross profit is
related to the resumption of production in December 2017 following the completion of phase 1
of the WOL Project and the ongoing ramp-up of production during
2018. The gross profit in 2018 was impacted by the temporary
suspension of cobalt sales, the impact of the DRC's new Mining Code
adopted in January 2018 (the "New DRC
Mining Code") and increased mine infrastructure and support
costs;
- Income tax expense increased to $12.9
million in 2018 from $1.5
million in 2017. The increase in income tax expense is due
to the minimum tax of 1% of revenues imposed under the New DRC
Mining Code;
- Open pit mining costs increased to $117.0 million in 2018 from $49.5 million in 2017 (previously disclosed under
operating expenses). The increase in open pit mining costs in 2018
compared to 2017 is due to the resumption of ore mining activities
which were suspended during the 2017 comparative period to ensure
sufficient ore availability for the WOL Project, of which, phase 1
was completed in December 2017 as
well as the ongoing ramp-up of production in 2018;
- Underground mining costs increased to $51.1 million in 2018 from $28.5 million in 2017 (previously disclosed under
operating expenses). The increase in underground mining costs
reflects an increase in total underground material mined following
the commencement of secondary development activities as well as the
continuation of primary development activities in 2018;
- KTC processing costs increased to $81.3
million in 2018 from $33.0
million in 2017 (previously disclosed under operating
expenses). The increase in KTC processing costs is due to the
increase in total material milled and maintenance activities
performed related to the resumption of production in December 2017 following the completion of phase 1
of the WOL Project and the ongoing ramp-up of production during
2018. Processing activities were largely suspended during the
comparative period in 2017;
- Luilu refinery costs increased to $300.7
million in 2018 from $20.8
million in 2017 (previously disclosed under operating
expenses). The increase in Luilu refinery costs is due to an
increase in copper cathode and cobalt contained in hydroxide
produced related to the resumption of production in December 2017 following the completion of phase 1
of the WOL Project and the on-going ramp-up of production during
2018. Processing activities were largely suspended during the
comparative period in 2017;
- Change in metal stock was $(63.4
million) in 2018 and $31.8
million in 2017. The change in metal stock reflects a
decrease in cost of sales during 2018 compared to 2017 due to
increased volumes of ore in stockpile inventory, work in progress
inventory and finished goods inventory. The increased volumes are
due to the ongoing ramp-up of production in 2018. The increase in
inventory was offset by a $24.3
million net realizable value adjustment on ore in stockpile
inventory due to lower realized copper and cobalt prices. Ore
mining and processing activities were largely suspended during the
comparative period in 2017;
- Mine infrastructure and support costs increased to $283.5 million in 2018 from $193.6 million in 2017 (previously disclosed
under operating expenses). The movement in mine infrastructure and
support costs is due to increased site activity following the
resumption of production in December
2017 and the ongoing ramp-up of production in 2018, an
increase in provisions for other receivables and increased support
costs for site activities following the ongoing ramp-up of
production;
- Depreciation increased to $276.6
million in 2018 from $81.4
million in 2017 (previously disclosed under operating
expenses). The increase in depreciation reflects the resumption of
production in Q4 2017 and the ongoing ramp-up of production in 2018
which drove the application of the unit of production depreciation
method against specific production assets as well as the
commencement of depreciation in 2018 of phase 1 and phase 2 of the
WOL Project; and
- Royalties and transportation costs increased to $201.7 million in 2018 from $3.6 million in 2017 (previously disclosed under
operating expenses). The increase in royalties and transportation
costs is due to increased sales of copper cathode and cobalt
contained in hydroxide following the resumption of production in
December 2017 and the ongoing ramp-up
of production in 2018. Government royalty costs for copper and
cobalt have increased to 3.5% of gross revenue from 2.5% of net
revenue in 2018 due to the implementation of the New DRC Mining
Code.
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.
Forward Looking Statements
This press
release may contain forward-looking statements. Often, but not
always, forward-looking statements can be identified by the use of
words such as "plans", "expects" or "does not expect", "is
expected", "budget", "scheduled", "estimates", "forecasts",
"intends", "anticipates" or "does not anticipate", or "believes",
or describes a "goal", or variation of such words and phrases or
state that certain actions, events or results "may", "could",
"would", "might" or "will" be taken, occur or be achieved. This
press release may contain forward-looking statements. Often, but
not always, forward-looking statements can be identified by the use
of words such as "plans", "expects", or "does not expect", "is
expected", "budget", "scheduled", "estimates", "forecasts",
"intends", "anticipates" or "does not anticipate", or "believes",
or describes a "goal", or variation of such words and phrases or
state that certain actions, events or results "may", "could",
"would", "might" or "will" be taken, occur or be achieved.
All forward-looking statements reflect the Company's beliefs
and assumptions based on information available at the time the
statements were made. Actual results or events may differ from
those predicted in these forward-looking statements. All of the
Company's forward-looking statements are qualified by the
assumptions that are stated or inherent in such forward-looking
statements, including the assumptions listed below. Although the
Company believes that these assumptions are reasonable, this list
is not exhaustive of factors that may affect any of the
forward-looking statements.
Forward-looking statements involve known and unknown risks,
future events, conditions, uncertainties and other factors which
may cause the actual results, performance or achievements to be
materially different from any future results, prediction,
projection, forecast, performance or achievements expressed or
implied by the forward-looking statements. Although Katanga has
attempted to identify important factors that could cause actual
actions, events or results to differ materially from those
described in forward-looking statements, there may be other factors
that cause actions, events or results not to be as anticipated,
estimated or intended. There can be no assurance that
forward-looking statements will prove to be accurate, as actual
results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not
place undue reliance on forward-looking statements.
The Company disclaims any intention or obligation to update
or revise any forward-looking statements whether as a result of new
information, future events, or otherwise, except in accordance with
applicable securities laws.
SOURCE Katanga Mining Limited