ZUG, Switzerland, May 15, 2019 /CNW/ - Katanga Mining
Limited (TSX: KAT) ("Katanga" or the
"Company") today announces its 2019 first quarter financial
results. Katanga's unaudited interim financial statements and
management's discussion and analysis for the three months ended
March 31, 2019 ("MD&A")
are available on SEDAR, www.sedar.com.
Financial performance highlights for the three months ended
March 31, 2019
Operating Results
|
|
Three months
ended
|
|
|
Mar
31,
2019
|
Dec 31,
2018
|
Mar 31,
2018
|
Sales
|
$'000
|
354,856
|
344,708
|
146,743
|
Mining, processing
and other costs (net of changes in metal
stocks)
|
$'000
|
(334,737)
|
(320,726)
|
(101,951)
|
Royalties and
transportation costs
|
$'000
|
(56,250)
|
(54,326)
|
(21,787)
|
Depreciation and
amortization
|
$'000
|
(56,395)
|
(85,721)
|
(54,610)
|
Gross
loss
|
$'000
|
(92,526)
|
(116,065)
|
(31,605)
|
|
|
|
|
|
Other
expenses
|
$'000
|
(2,780)
|
(14,456)
|
(685)
|
Write-offs/loss on
disposal of property, plant and equipment
|
$'000
|
(2,957)
|
(8,088)
|
(5,961)
|
Net finance
costs
|
$'000
|
(116,191)
|
(111,762)
|
(96,963)
|
OSC
settlement*
|
$'000
|
-
|
(22,248)
|
|
Income tax
expense
|
$'000
|
(3,990)
|
(3,557)
|
-
|
Net loss and
comprehensive loss
|
$'000
|
(218,444)
|
(276,176)
|
(135,214)
|
Non-controlling
interests
|
$'000
|
(38,785)
|
(48,718)
|
(57,290)
|
Attributable to
shareholders of the company
|
$'000
|
(179,659)
|
(227,458)
|
(77,924)
|
|
|
|
|
|
Adjusted
EBITDA**
|
$'000
|
(41,868)
|
(52,888)
|
16,359
|
|
|
|
|
|
Basic and diluted
loss per common share
|
$/share
|
(0.09)
|
(0.12)
|
(0.04)
|
|
|
|
|
|
C1
costs***
|
$/lb
|
2.95
|
2.53
|
2.54
|
|
|
*
|
Refer to item 2 under
'Restatement of Historical Financial Statements filed in 2017 and
OSC Settlement' in the Company's MD&A.
|
**
|
The aggregation of
sales, cost of sales (less depreciation), 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
measures' of the Company's MD&A).
|
***
|
Refer to item 22
'Non-IFRS measures' of the Company's MD&A.
|
|
|
Three months
ended
|
|
|
Mar
31,
2019
|
Dec 31,
2018
|
Mar 31,
2018
|
Copper
revenue
|
$'000
|
355,088
|
270,765
|
146,480
|
Cobalt
revenue
|
$'000
|
(232)
|
73,943
|
-
|
Concentrate
revenue
|
$'000
|
-
|
-
|
263
|
Total
revenue
|
$'000
|
354,856
|
344,708
|
146,743
|
Including net
provisional pricing adjustment
|
|
22,371
|
(10,012)
|
(2,197)
|
|
|
|
|
|
|
|
|
|
|
Copper cathode
sold
|
tonnes
|
56,401
|
48,686
|
22,640
|
Cobalt contained in
hydroxide sold
|
tonnes
|
-
|
1,430
|
-
|
Copper contained in
concentrate sold
|
tonnes
|
-
|
-
|
74
|
|
|
|
|
|
|
|
|
|
|
LME average copper
price
|
$/lb
|
2.82
|
2.80
|
3.16
|
Realized copper
price*
|
$/lb
|
2.35
|
2.10
|
2.48
|
MB average cobalt
price
|
$/lb
|
17.77
|
31.68
|
38.37
|
|
*
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 $355.0
million in Q1 2019 from $146.5
million in Q1 2018. The increase in copper revenue is due to
the increase in copper production and sales driven by the
completion of phase one of the WOL Project.
- 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, depreciation, royalties and
transportation costs is due to:
|
|
Three months
ended
|
|
|
Mar
31,
2019
|
Dec 31,
2018
|
Mar 31,
2018
|
Open pit mining
costs
|
$'000
|
29,728
|
37,283
|
14,981
|
Underground mining
costs
|
$'000
|
15,179
|
14,003
|
9,748
|
KTC processing
costs
|
$'000
|
27,439
|
28,533
|
14,328
|
Luilu refinery
costs
|
$'000
|
150,224
|
113,937
|
39,132
|
Change in metal
stock
|
$'000
|
(3,316)
|
11,806
|
(30,173)
|
Mine infrastructure
and support costs
|
$'000
|
112,896
|
114,544
|
51,704
|
Expense on issue of
capital spares to production
|
$'000
|
2,587
|
620
|
2,231
|
Depreciation
|
$'000
|
56,395
|
85,721
|
54,610
|
Royalties and
transportation costs
|
$'000
|
56,250
|
54,326
|
21,787
|
Total cost of
sales
|
$'000
|
447,382
|
460,773
|
178,348
|
Review of 2019 First Quarter Expenses
- Gross loss increased to $92.5
million in Q1 2019 from $31.6
million in Q1 2018. The increase in gross loss is driven by
an increase in net realizable value adjustment on ore in stockpile
inventory, provision on obsolete consumable inventories, higher
reagent costs at Luilu and an increase in total oxide feed received
from KTC in line with the optimized mine plan, offset by an
increase in copper revenue due to an increase in copper
production;
- Open pit mining costs increased to $29.7
million in Q1 2019 from $15.0
million in Q1 2018. The increase in open pit mining costs is
due to an increase in total material mined;
- KTC processing costs increased to $27.4
million in Q1 2019 from $14.3
million in Q1 2018. KTC processing and operational costs
increased due to an increase in total material milled and
processed;
- Luilu refinery costs increased to $150.2
million in Q1 2019 from $39.1
million in Q1 2018, 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 $113.0 million in Q1 2019 from $51.7 million in Q1 2018. The majority of this
increase is the inventory obsolescence provision of $46.9 million; and
- Royalties and transportation costs have increased to
$56.3 million in Q1 2019 from
$21.8 million in Q1 2018, due to
higher copper revenues and sales tonnes.
Cash Flows
|
|
Three months
ended
|
|
|
Mar
31,
2019
|
Dec 31,
2018
|
Mar 31,
2018
|
Cash flow generated
(used) in:
|
|
|
|
|
|
|
|
|
|
Operating activities
before changes in working capital
|
$'000
|
26,975
|
(11,966)
|
35,848
|
Changes in working
capital
|
$'000
|
(27,334)
|
139,952
|
(417)
|
Operating
activities
|
$'000
|
(359)
|
127,986
|
35,431
|
Investing
activities
|
$'000
|
(170,929)
|
(166,037)
|
(82,635)
|
Financing
activities
|
$'000
|
260,000
|
22,500
|
29,700
|
Increase
(decrease) in cash
|
$'000
|
88,712
|
(15,551)
|
(17,504)
|
|
|
|
|
|
Cash, beginning of
period
|
$'000
|
5,499
|
21,420
|
38,144
|
|
|
|
|
|
Effect of exchange
rate changes on cash held in foreign currencies
|
$'000
|
27
|
(370)
|
27
|
Cash, end of
period
|
$'000
|
94,238
|
5,499
|
20,667
|
Review of 2019 First Quarter Cash Flows
- Cash flows generated in operating activities before changes in
working capital decreased to $27.0
million in Q1 2019 from $35.9
million cash flow in Q1 2018. The decrease in cash flows
generated in operating activities before changes in working capital
is driven by a decrease in net income (excluding non-cash item
addbacks) due to increased operating costs and delayed revenue due
to the temporary suspension of cobalt sales;
- Changes in working capital outflows increased to $27.3 million in Q1 2019 from an outflow of
$0.4 million Q1 2018. The increase in
working capital outflows is primarily driven by the decrease in
accounts payable, offset by an increase in accounts receivable due
to higher sales volumes;
- Cash outflows from investing activities increased to
$170.9 million in Q1 2019 from
$82.6 million in Q1 2018. The
increase in cash outflows relates to planned spending on
expansionary and sustaining capital expenditures; and
- Cash inflows from financing activities increased to
$260.0 million in Q1 2019 from
$29.7 million in Q1 2018. The
increase in cash inflows from financing activities relates to
drawdowns under the Bank Loan Facility (please see Item 9 under
'Liquidity and Capital Resources' in the Company's MD&A for
further details).
Subsequent Events
Besides the previously announced subsequent events (see previous
press releases of the Company available on www.sedar.com), the
following events occurred since the quarter ended March 31, 2019.
Update on Loan Facilities
On December 31, 2018, interest of
$452.8 million was owed to Glencore
under the Loan Facilities (please see Item 9 under 'Liquidity and
Capital Resources' in the Company's MD&A for further details)
provided to the Company. The Company and Glencore recognized that
in light of the Company's financial position, an alternative
funding solution would be needed from Glencore. In recognition of
that, Glencore earlier this year provided support for additional
working capital funding. Subsequent to March
31, 2019, the Loan Facility was amended to formalize the
capitalization of the interest so that it will now be payable on
maturity in 2021.
In addition, Katanga received a proposal from Glencore which is
designed to address the Company's overall indebtedness to Glencore
under the Loan Facilities. In response to the Proposal, a special
committee of independent directors has been formed and such
committee has retained advisors to facilitate ongoing discussions
with Glencore.
Glencore and the Company have taken steps to further formalize
Glencore's ongoing support and to facilitate consideration of the
Proposal or alternatives for dealing with repayment obligations
under the Loan Facilities. In furtherance of this, Glencore has
agreed to provide the required financial support to the Company to
enable the Company to pay its debts as when they become due and
payable in the 12 month period from the date of approval of the
unaudited interim condensed consolidated financial statements for
the three months ended 31 March
2019.
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.
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. The key assumptions that have been made
in connection with the forward-looking statements include the
following: there being no significant disruptions affecting the
operations of the Company whether due to legal disputes, judicial
action, labour disruptions, supply disruptions, power disruptions,
rollout of new equipment, damage to equipment or otherwise;
permitting, development, operations, expansion and acquisitions at
KCC being consistent with the Company's current expectations;
continued recognition of the Company's mining concessions and other
assets, rights, titles and interests in the DRC; political and
legal developments in the DRC being consistent with its current
expectations; the continued provision or procurement of additional
funding from Glencore for operations, the completion of the T17
Underground Mine and the Power Project (as defined in the Company's
annual information form for the year ended December 31, 2018 dated April 1, 2019); new equipment performs to
expectations; the exchange rate between the US dollar, South
African rand, British pounds, Canadian dollar, Swiss franc,
Congolese franc and Euro being approximately consistent with
current levels; certain price assumptions for copper and cobalt;
prices for diesel, natural gas, fuel oil, electricity and other key
supplies being approximately consistent with current levels;
production, operating expenses and cost of sales forecasts for the
Company meeting expectations; the accuracy of the current ore
reserve and mineral resource estimates of the Company (including
but not limited to ore tonnage and ore grade estimates); and labour
and material costs increasing on a basis consistent with the
Company's current expectations.
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