ZUG, Switzerland, Aug. 6, 2019 /CNW/ - Katanga Mining Limited
(TSX: KAT) ("Katanga" or the "Company") today announces its 2019
second quarter financial results. Katanga's unaudited interim
financial statements and management's discussion and analysis for
the three and six months ended June 30,
2019 ("MD&A") are available on SEDAR
(www.sedar.com).
Outlook
On April 29, 2019, the Company
announced that its 75%-owned subsidiary, Kamoto Copper Company
("KCC"), had commenced a comprehensive business review targeting
mining efficiencies and processing improvements as well as
enhancements to product quality realizations and overhead
reductions (the "Review").
Initial indications suggest there may be scope for margin
improvements in the order of $200-250
million per annum. Further work needs to be undertaken to develop
detailed implementation plans to deliver these improvements, which
are expected to be realizable by 2022.
These improvements are expected to materially increase the cash
flow generation of KCC from 2022, when it is projected to achieve
targeted life of mine average production of approximately 300kt of
copper and 30kt of cobalt, resulting in a steady state copper unit
cash cost of approximately $1.65/lb,
before cobalt by-product credits, and approximately $0.75/lb after cobalt by-products revenue, net of
allocable cobalt direct production and realization/selling costs of
approximately 60c/lb.1
As a result, production guidance of copper and cobalt has been
revised to:
Commodity
|
|
Units
|
Production
Guidance
|
|
|
|
FY 2019
|
FY 2020
|
FY 2021
|
Copper(1)
|
|
kt
|
235
|
260
|
290
|
Cobalt(2)(3)
|
|
kt
|
14.4
|
29.6
|
35.7
|
Notes:
|
|
(1)
|
Annual copper
production guidance subject to +/- 15 kt variation
|
(2)
|
Annual cobalt
production guidance subject to +/- 2 kt variation, includes
reprocessed cobalt post completion of the IX Plant.
|
(3)
|
2019 cobalt
production guidance includes 11.8kt of saleable cobalt
|
Notwithstanding these targets, production in any given year will
fluctuate as a function of numerous factors, including availability
and utilization of the plant, geological and mining conditions,
logistics, availability of reagents, availability of electricity,
macro-economic factors such as commodity prices, input costs and
geopolitical developments (including a new mining code in the
Democratic Republic of Congo ("DRC") effective January 27, 2018 (the "New DRC Mining
Code")).
1
|
Realization costs are
based on an assumed copper price of $6,500/t and realized cobalt
price of $15/lb.
|
Operating Results
|
|
Three months
ended
|
Six months
ended
|
|
|
Jun
30,
|
Mar 31,
|
Jun 30,
|
Jun
30,
|
Jun 30,
|
|
|
2019
|
2019
|
2018
|
2019
|
2018
|
Sales*
|
$'000
|
301,091
|
354,856
|
345,527
|
655,947
|
492,270
|
Mining, processing
and other costs (net of changes in
metal stocks)*
|
$'000
|
(270,370)
|
(334,737)
|
(130,372)
|
(605,107)
|
(232,323)
|
Royalties and
transportation costs*
|
$'000
|
(68,170)
|
(56,250)
|
(51,865)
|
(124,420)
|
(73,652)
|
Depreciation and
amortization
|
$'000
|
(57,327)
|
(56,395)
|
(61,352)
|
(113,722)
|
(115,962)
|
Gross (loss)
profit
|
$'000
|
(94,776)
|
(92,526)
|
101,938
|
(187,302)
|
70,333
|
|
|
|
|
|
|
|
Other income
(expenses)*
|
$'000
|
1,883
|
(2,780)
|
(8,772)
|
(897)
|
(9,457)
|
Write-offs / loss on
disposal of property, plant and equipment*
|
$'000
|
(27,684)
|
(2,957)
|
(3,510)
|
(30,641)
|
(9,471)
|
Net finance
costs
|
$'000
|
(116,999)
|
(116,191)
|
(150,482)
|
(233,190)
|
(247,445)
|
Restructuring
expenses
|
$'000
|
-
|
-
|
(248,128)
|
-
|
(248,128)
|
Income tax
expense
|
$'000
|
(2,551)
|
(3,990)
|
-
|
(6,541)
|
-
|
Net loss and
comprehensive loss
|
$'000
|
(240,127)
|
(218,444)
|
(308,954)
|
(458,571)
|
(444,168)
|
Non-controlling
interests
|
$'000
|
(46,573)
|
(38,785)
|
15,594
|
(85,358)
|
(41,696)
|
Attributable to
shareholders of the company
|
$'000
|
(193,554)
|
(179,659)
|
(324,548)
|
(373,213)
|
(402,472)
|
|
|
|
|
|
|
|
Adjusted
EBITDA*
|
$'000
|
(63,249)
|
(41,868)
|
151,008
|
(105,117)
|
167,367
|
|
|
|
|
|
|
|
Basic and diluted
loss per common share
|
$/share
|
(0.10)
|
(0.09)
|
(0.17)
|
(0.20)
|
(0.21)
|
C1 costs**
|
$/lb
|
2.66
|
2.95
|
1.08
|
2.81
|
1.72
|
*
|
The aggregation of
sales, mining, processing and other costs, royalties and
transportation costs, other
income (expenses) and write-offs / loss on disposal of property,
plant and equipment 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
|
Six months
ended
|
|
|
Jun
30,
2019
|
Mar 31,
2019
|
Jun 30,
2018
|
Jun
30,
2019
|
Jun 30,
2018
|
Copper
revenue
|
$'000
|
280,226
|
355,088
|
204,383
|
635,314
|
350,863
|
Cobalt
revenue
|
$'000
|
20,865
|
(232)
|
141,144
|
20,633
|
141,144
|
Concentrate
revenue
|
$'000
|
-
|
-
|
-
|
-
|
263
|
Total
revenue
|
$'000
|
301,091
|
354,856
|
345,527
|
655,947
|
492,270
|
Including net
provisional
pricing adjustment
|
|
(23,149)
|
22,371
|
(1,188)
|
(778)
|
109
|
|
|
|
|
|
|
|
Copper cathode
sold
|
tonnes
|
53,700
|
56,401
|
30,825
|
110,101
|
53,461
|
Cobalt contained in
hydroxide sold
|
tonnes
|
1,245
|
-
|
2,176
|
1,245
|
2,176
|
|
|
|
|
|
|
|
LME average copper
price
|
$/lb
|
2.77
|
2.82
|
3.12
|
2.80
|
3.14
|
Realized copper
price*
|
$/lb
|
1.91
|
2.35
|
2.49
|
2.13
|
2.50
|
MB average cobalt
price
|
$/lb
|
15.22
|
17.77
|
42.45
|
16.50
|
40.41
|
*
|
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 decreased to $280.2
million in Q2 2019 from $355.0
million in Q1 2019. Copper revenue increased to $635.3 million in Q2 2019 YTD from $350.9 million in Q2 2018 YTD. The decrease in
copper revenue in Q2 2019 versus Q1 2019 was due to slightly lower
copper sales (and production) and a decrease in the realized copper
price. The increase in copper revenue during Q2 2019 YTD versus Q2
2018 YTD is due to the increase in copper sales (and production),
driven by the completion of phase one of the WOL Project, which was
partially offset by a lower realized copper price.
- Cobalt revenue increased to $20.9
million in Q2 2019 from ($0.2)
million in Q1 2019. Cobalt revenue decreased to $20.6 million in Q2 2019 YTD from $141.1 million in Q2 2018 YTD. The increase in
cobalt revenue in Q2 2019 versus Q1 2019 is due to the resumption
of export and sale of cobalt that complies with both international
and local DRC transport regulations with respect to the levels of
uranium. The decrease in cobalt revenue in Q2 2019 YTD versus Q2
2018 YTD is due to the effect of the temporary suspension of export
and sale of cobalt sales from November 6,
2018 to April 15, 2019.
- 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
contractual 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 are recorded in sales in the
Statement of Loss and Comprehensive Loss and within receivables on
the Statement of Financial Position. These embedded derivatives
comprising provisional pricing, included in receivables, are
classified within level 2 of the fair value hierarchy.
The movement in cost of sales, depreciation, royalties and
transportation costs comprises:
|
|
Three
months
ended
|
Six months
ended
|
|
|
Jun
30,
2019
|
Mar 31,
2019
|
Jun 30,
2018
|
Jun
30,
2019
|
Jun 30,
2018
|
Open pit mining
costs
|
$'000
|
29,704
|
29,728
|
35,171
|
59,432
|
50,152
|
Underground mining
costs
|
$'000
|
14,508
|
15,179
|
12,995
|
29,687
|
22,743
|
KTC processing
costs
|
$'000
|
22,678
|
27,439
|
16,497
|
50,117
|
30,825
|
Luilu refinery
costs
|
$'000
|
132,817
|
150,224
|
64,337
|
283,041
|
103,469
|
Change in metal
stock
|
$'000
|
(9,654)
|
(3,316)
|
(58,359)
|
(12,970)
|
(88,532)
|
Mine infrastructure
and support costs
|
$'000
|
79,366
|
112,896
|
59,889
|
192,262
|
111,593
|
Expense on issue of
capital spares to production
|
$'000
|
950
|
2,587
|
(158)
|
3,537
|
2,073
|
Depreciation and
amortization
|
$'000
|
57,327
|
56,395
|
61,352
|
113,722
|
115,962
|
Royalties and
transportation costs
|
$'000
|
68,170
|
56,250
|
51,865
|
124,420
|
73,652
|
Total cost of
sales
|
$'000
|
395,866
|
447,382
|
243,589
|
843,248
|
421,937
|
Review of Expenses for Three Month Period and Six Months
Ended June 30, 2019:
- Gross loss increased to $94.8
million in Q2 2019 from $92.5
million in Q1 2019. Gross loss increased to $187.3 million in Q2 2019 YTD from $70.3 million gross profit in Q2 2018 YTD. The
increase in gross loss in Q2 2019 compared to Q1 2019 is due to
lower revenue due primarily to lower realized copper prices, offset
by lower processing costs due to lower material milled in KTC and
lower production levels in Luilu and a decrease in provisions
relating to slow moving and obsolete stock. The increase in gross
loss in Q2 2019 YTD compared to Q2 2018 YTD is driven by reduced
cobalt revenue (volume and price), a provision for obsolete
consumable inventories, higher reagent costs at Luilu and an
increase in total volumes processed, in line with the optimized
mine plan. These were partially offset by an increase in copper
revenue due to increased copper sales (and production).
- Open pit mining costs remained consistent at $29.7 million in Q2 2019 and in Q1 2019. Open pit
mining costs increased to $59.4
million in Q2 2019 YTD from $50.1
million in Q2 2018 YTD. The increase in open pit mining
costs is due to an increase in total material mined.
- KTC processing costs decreased to $22.7
million in Q2 2019 from $27.4
million in Q1 2019. KTC processing costs increased to
$50.1 million in Q2 2019 YTD from
$30.8 million in Q2 2018 YTD. KTC
processing and operational costs have increased due to an increase
in total material milled and processed.
- Luilu refinery costs decreased to $132.8
million in Q2 2019 from $150.2
million in Q1 2019. Luilu refinery costs increased to
$283.0 million in Q2 2019 YTD from
$103.5 million in Q2 2018 YTD. Luilu
refinery costs increased due to increased reagent costs and an
increase in total oxide feed from KTC, in line with the optimized
mine plan.
- Royalties and transportation costs have increased to
$68.2 million in Q2 2019 from
$56.3 million in Q1 2019. Royalties
and transportation costs have increased to $124.4 million in Q2 2019 YTD from $73.7 million in Q2 2018 YTD. Royalties and
transportation costs have increased due to higher copper revenues
and sales tonnes. YTD variances are due to the implementation of
the New DRC Mining Code, which changed the basis of royalties from
a net revenue to gross revenue basis, increased base royalty rates
and cobalt being declared a strategic metal and taxed at 10%.
Cash Flows
|
|
Three months
ended
|
Six months
ended
|
|
|
Jun
30,
2019
|
Mar 31,
2019
|
Jun 30,
2018
|
Jun
30,
2019
|
Jun 30,
2018
|
Cash flow
generated
(used) in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
before changes in
working capital
|
$'000
|
(26,501)
|
26,975
|
(31,308)*
|
475
|
4,540*
|
Changes in working
capital
|
$'000
|
(73,164)
|
(27,334)
|
(107,496)
|
(100,499)
|
(107,913)
|
Operating
activities
|
$'000
|
(99,665)
|
(359)
|
(138,804)
|
(100,024)
|
(103,373)
|
Investing
activities
|
$'000
|
(85,304)
|
(170,929)
|
(88,431)
|
(256,233)
|
(171,066)
|
Financing
activities
|
$'000
|
115,000
|
260,000
|
243,982
|
375,000
|
273,682
|
(Decrease)
increase in
cash
|
$'000
|
(69,969)
|
88,712
|
16,747
|
18,743
|
(757)
|
|
|
|
|
|
|
|
Cash, beginning of
period
|
$'000
|
94,238
|
5,499
|
20,667
|
5,499
|
38,144
|
Effect of exchange
rate changes on cash held in foreign currencies
|
$'000
|
52
|
27
|
48
|
79
|
75
|
Cash, end of
period
|
$'000
|
24,321
|
94,238
|
37,462
|
24,321
|
37,462
|
*
|
Includes $191 million
as cash component of the one-time restructuring expense under
the
Settlement Agreement (Refer to item 9 of the Company's
MD&A).
|
Review of the three and six months Cash Flows ended June 30, 2019
- Cash flows from operating activities before changes in working
capital decreased to $26.5 million
used in Q2 2019 from $27.0 million
generated in Q1 2019. Cash flows generated in operating activities
before changes in working capital decreased to $0.5 million generated in Q2 2019 YTD from
$4.5 million in Q2 2018 YTD. The
decrease in cash flows in Q2 2019 compared to Q1 2019 was driven
principally by a decrease in revenue due to lower realized prices
of copper. The decrease in cash flows in Q2 2019 YTD compared to Q2
2018 YTD was driven mainly by an increase in processing and mine
infrastructure and support costs and lower cobalt revenue;
- Changes in working capital cash outflows increased to a
$73.2 million outflow in Q2 2019 from
an outflow of $27.3 million Q1 2019.
Changes in working capital outflows decreased to $100.5 million in Q2 2019 YTD from an outflow of
$107.9 million Q2 2018 YTD. The
increase in working capital cash outflows in Q2 2019 compared to Q1
2019 resulted primarily from a lower decrease in prepaid expense
and other current and non-current assets, as well as an increase in
inventories and a decrease in accounts payable and accrued
liabilities, partially off-set by a lower increase in receivables.
The decrease in outflows in Q2 2019 YTD compared to Q2 2018 YTD was
driven by a decrease in prepaid expense and other current and
non-current assets and a lower increase in inventories, partially
off-set by a decrease in accounts payable and accrued
liabilities;
- Cash outflows from investing activities decreased to
$85.3 million in Q2 2019 from
$170.9 million in Q1 2019. Cash
outflows from investing activities increased to $256.2 million in Q2 2019 YTD from $171.1 million in Q2 2018 YTD. The
decrease/increase in the cash outflows largely reflects the
underlying costs of expansionary capital expenditures in the
respective periods; and
- Cash inflows from financing activities decreased to
$115 million in Q2 2019 from
$260.0 million in Q1 2019. Cash
inflows from financing activities increased to $375 million in Q2 2019 YTD from $273.7 million in Q2 2018 YTD. The
decrease/increase in cash inflows from financing activities
reflected the rate of drawdowns under the Bank Loan and other
Facilities (please see item 2 of the Company's MD&A for further
details).
Qualified Person
Tahir Usmani, PEng, APEGA, Chief
Mine Planning Engineer of KCC, has reviewed and approved the
scientific and technical disclosure in this news release. Mr.
Usmani is a "qualified person" for the purposes of NI 43‐101 ‐
Standards of Disclosure for Mineral Projects.
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. The key assumptions that have been made
in connection with the forward-looking statements include the
following: the ramp-up of production following commissioning of the
WOL Project (as defined in the Company's annual information form
for the year ended December 31, 2018
dated April 1, 2019 (the "AIF")); the
realization of the expected improvements from the WOL Project;
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; the Company
being able to confirm any of the margin improvements identified by
the Review and then successfully implementing any such margin
improvements; continued recognition of the Company's mining
concessions and other assets, rights, titles and interests in the
DRC; the completion of the ion exchange plant in the time
contemplated, at the expected cost of construction; the completion
of the Acid Plant in the time contemplated, at the expected cost of
construction; 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 additional phases of
the WOL Project and the Power Project (as defined in the Company's
AIF); 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