- Company to raise an estimated CDN$7.6
billion under discounted rights offering
- Glencore to provide full standby commitment
- US$5.8 billion in debt owed to
Glencore to be repaid with approximately US$1.5 billion residual debt to Glencore to
remain outstanding until 2023
- New NI 43-101 technical report filed
ZUG, Switzerland, Nov. 7, 2019 /CNW/ - Katanga Mining Limited (TSX:
KAT) ("Katanga" or the "Company") announces today that it has filed
a preliminary short form prospectus with securities regulatory
authorities in each of the provinces and territories of
Canada in respect of an offering
of rights ("Rights") to purchase common shares of the Company
("Common Shares") to raise approximately CDN$7.6 billion (the "Rights Offering").
Glencore has agreed to accept the Rights Offering proceeds of
approximately CDN$7.6 billion or
the equivalent in Common Shares issued from treasury under the
Rights Offering to repay US$5.8
billion of debt to Glencore (based on a five day average
CDN$/US$ exchange rate when the Subscription Price (as defined
below) is determined). Accordingly, the Rights Offering proceeds
will fluctuate depending on the five day average CDN$/US$ exchange
rate in effect when the Subscription Price is determined). An
affiliate of Glencore plc ("Glencore"), which owns approximately
86.3% of the Company's outstanding Common Shares, will provide a
standby commitment such that all Common Shares available for
purchase under the Rights Offering will be fully subscribed. The
Company will use the entirety of the proceeds of the offering to
repay US$5.8 billion of debt owed to
an affiliate of Glencore under the Glencore Loan Facilities (as
described below), with approximately US$1.5
billion of debt owed to Glencore ("Glencore Debt") being
retained by the Company. Accordingly, Glencore is not committing
any new monies to Katanga as a result of the Rights Offering. The
Offering will lead to a reduction of the debt due to Glencore of
US$5.8 billion and a corresponding
increase in Common Shares in Katanga held by Glencore (or, to the
extent that other shareholders take up their Rights, cash to
Glencore).
Summary of Rights Offering
Pursuant to the Rights Offering, all eligible shareholders of
Katanga (subject to applicable law) will receive one Right for
every Common Share owned on the record date (the "Record Date").
The Rights Offering will include an additional subscription
privilege entitling holders of Rights who have fully exercised
their Rights to subscribe for additional Common Shares, if
available, that are not otherwise subscribed for under the Rights
Offering.
In accordance with the rules of the Toronto Stock Exchange
("TSX"), and as provided in the standby purchase agreement entered
into between the Company and Glencore (the "Standby Purchase
Agreement"), the subscription price for the Common Shares to be
purchased upon exercise of the Rights (the "Subscription Price")
will represent a 25 percent discount to the volume weighted average
price of Common Shares on the TSX for the five trading days
immediately prior to the day the final short form prospectus for
the Rights Offering (the "Final Prospectus") is filed.
Calculated as of today, each Right would entitle an eligible
shareholder to purchase approximately 15 Common Shares (the "Basic
Subscription Privilege"), being the number of Common Shares as is
equal to approximately CDN$7.6
billion (which figure is based on a five day average
CDN$/US$ exchange rate as of November 6,
2019), divided by the Subscription Price, and further
divided by the number of Common Shares outstanding at the time of
pricing (currently 1,907,380,413 Common Shares). The foregoing is
provided for illustrative purposes only and the number of Common
Shares to which an eligible shareholder is entitled will fluctuate
depending on the five day average CDN$/US$ exchange rate in effect
when the Subscription Price is determined. Where the exercise of
Rights would otherwise entitle a holder of Rights to receive
fractional Common Shares, the holder's entitlement will be reduced
to the next lowest whole number of Common Shares. The Company will
not issue fractional Common Shares or pay cash in lieu thereof.
The Rights will also entitle any shareholder who exercises in
full the Basic Subscription Privilege attached to their Rights to
subscribe for additional Common Shares, not otherwise subscribed
for under the Rights Offering by other shareholders under their
Basic Subscription Privilege, pursuant to an additional
subscription privilege ("Additional Subscription Privilege"). The
period during which Rights may be exercised under the Rights
Offering will be determined at the time of filing the Final
Prospectus.
Katanga has applied to have the Rights listed for trading on the
TSX. The approval of such listing is subject to the Company
fulfilling all of the listing requirements of the TSX.
Standby Purchase Agreement
In connection with the Rights Offering, Katanga and Glencore
have entered into the Standby Purchase Agreement pursuant to which
Glencore will purchase at the Subscription Price, any Common Shares
(the "Standby Shares") that would otherwise be issuable upon
exercise of Rights offered under the Rights Offering that are not
otherwise subscribed for by holders of Rights pursuant to their
Basic Subscription Privilege and Additional Subscription Privilege
(the "Standby Commitment").
Glencore has agreed to accept the Rights Offering proceeds of
approximately CDN$7.6 billion or
the equivalent in Common Shares issued from treasury under the
Rights Offering to repay US$5.8
billion of debt to Glencore based on a five day average
CDN$/US$ exchange rate (see above for further details).
The Rights Offering, and Glencore's ability and obligation to
participate in the Rights Offering, including in respect of the
Standby Commitment, is subject to certain conditions including, but
not limited to, the receipt of all necessary approvals, including
the approval of the TSX, which has been notified of the Rights
Offering.
Further details concerning the Rights Offering, including the
terms of the Standby Purchase Agreement, are contained in the
Company's preliminary short form prospectus which will be available
on the Company's SEDAR profile. The foregoing description of
certain terms of the Standby Purchase Agreement does not purport to
be complete and is qualified in its entirety by reference to the
full text of such agreement, to be filed by Katanga under its
profile at www.sedar.com.
Subject to applicable law, a certificate representing the Rights
issued, together with the Final Prospectus will be distributed to
all eligible registered shareholders who own Common Shares on the
Record Date along with instructions explaining how many Rights a
shareholder is entitled to receive, the number of Common Shares
that can be purchased for those Rights, how to subscribe for the
purchase of Common Shares pursuant to those Rights, or instruct
such shareholder's broker to subscribe for the purchase of Common
Shares on the shareholder's behalf, and how to sell Rights in the
market or otherwise transfer them to another party.
Amended Loan Facilities
In connection with the Rights Offering, Glencore (and its
affiliates) and Katanga (and its affiliates) have agreed to amend
the terms of the existing credit facilities provided to Katanga
(and its affiliates) under a secured term facility agreement (the
"Glencore Loan Facilities"). Upon closing of the Rights Offering,
the Glencore Loan Facilities will be merged into a single
US$1.75 billion facility consisting
of the remaining approximately US$1.5
billion of Glencore Debt not repaid under the Rights
Offering and undrawn committed liquidity of approximately
US$250 million, which Glencore has
agreed to provide under a subsequent facility agreement. The
subsequent facility will mature on January
1, 2023, and bear interest at a rate of 7% per annum. The
interest will be capitalized to the extent the Company has
insufficient cash to pay it when due.
Special Committee Approval
The Company's decision to undertake the Rights Offering is the
result of analysis, discussions and negotiations by and among
representatives of the Company, a special committee of independent
directors of Katanga (the "Special Committee"), Glencore, and their
respective advisors to address the Company's overall indebtedness
to Glencore under the Glencore Loan Facilities.
The Special Committee believes that the recapitalization of the
Company is in the best interest of the Company and its minority
shareholders because it: (i) provides the minority shareholders
with the right, but not the obligation, to participate pro-rata in
the recapitalization, (ii) is merely an acceleration of what would
effectively occur on January 1, 2021
pursuant to the Company's existing rights offering agreement with
Glencore if there is a default on the Glencore Loan Facilities, and
(iii) is expected to result in less dilution to minority
shareholders than repaying the debt at maturity given that (A)
interest continues to accrue and be capitalized, (B) Glencore has
agreed to extend the maturity of the remaining Glencore Debt (in
the amount of approximately US$1.5
billion) to January 1, 2023,
(C) a rights issue on January 1, 2021 is expected to be materially
more dilutive as the share price is likely to be materially
negatively affected by a continued deterioration in the Issuer's
credit worthiness resulting from uncertainty with respect to the
Issuer's financial condition and the Issuer's efforts to address
this, and (D) addressing the recapitalization of the Issuer sooner
rather than later removes the uncertainty regarding the Issuer's
financial viability that was first disclosed in March 2019. The
Special Committee also believes that it is more appropriate to
address the debt owed to Glencore now rather than waiting until the
maturity of the Glencore Loan Facilities in light of the very
limited prospect that the Glencore Debt could be repaid or
refinanced by a third party on or prior to January 1, 2021, as well
as volatility in the Company's share price.
New Technical Report
In connection with the filing of the preliminary prospectus, the
Company has also filed an updated technical report in accordance
with NI 43-101 – Standards of Disclosure for Mineral
Projects ("NI 43-101") (the "2019 TR") on the material assets
of Kamoto Copper Company ("KCC"), the Company's 75% owned operating
subsidiary in the Democratic Republic of
Congo. The 2019 TR provides certain updates to KCC's
technical model and anticipated production profiles based on
operational and other developments since Katanga's most recent NI
43-101 technical report was filed on April
2, 2018. The 2019 TR is available on SEDAR at under
Katanga's profile at www.sedar.com.
This news release does not constitute an offer to sell, nor
the solicitation of an offer to buy, the securities in any
jurisdiction; nor shall there be any sale of securities mentioned
in this news release in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of such
jurisdiction.
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