ZUG, Switzerland, April 22, 2018 /CNW/ - Katanga Mining
Limited (TSX: KAT) ("Katanga" or the
"Company") was notified on April 20,
2018 that its joint venture partner, the Democratic Republic of Congo ("DRC")
state-owned La Générale des Carrières et des Mines ("Gécamines"),
in the Company's 75% DRC operating subsidiary Kamoto Copper Company
("KCC"), has commenced legal proceedings in DRC to dissolve KCC
following KCC's failure to address its previously disclosed capital
deficiency or, alternatively, if the Court provides KCC with a
period of time within which to regularize the situation, to request
the appointment of an expert to assess and report to the Court on
KCC's financial position and the recapitalization plan. A
court hearing is scheduled to be held in the DRC on May 8th, 2018. The court may grant KCC
a maximum period of six (6) months to regularize the situation. The
Company believes that it has several options to remedy KCC's
capital deficiency and avoid KCC's dissolution.
As disclosed in the Company's annual information form for the
year ended December 31, 2017, dated
March 31, 2018, under DRC corporate
law applicable to KCC, KCC was obliged to address a capital
deficiency that first arose in 2014 when, as a result of historical
losses incurred during the rehabilitation of KCC's assets
through, amongst others, the servicing of the inter-company loans
to fund such rehabilitation, KCC shareholders' equity fell below
half of its authorized capital. In accordance with such laws, the
capital deficiency should have been rectified by December 31, 2017, and, as a result of this not
having been done, an interested party was entitled to commence
legal action for the dissolution of KCC before DRC judicial
authorities, which Gécamines has now done.
In 2017 the Company proposed a recapitalization plan to
Gécamines in compliance with the provisions of DRC law and the
terms of the Joint Venture Agreement between them (the "JV
Agreement") that would have rectified the capital deficiency. KCC
has made numerous attempts to engage in constructive negotiations
with Gécamines regarding the recapitalization plan. However,
Gécamines has, instead of meaningfully engaging with the Company,
unilaterally commenced the proceeding.
The Company will continue to attempt to engage in discussions
with Gécamines and will take all other necessary steps to ensure
the continuation of the operations of KCC and protect its rights
under the law and the JV Agreement.
The Company is continuing to assess options for regularizing the
deficiency, including the conversion of a portion of existing
intercompany debt owed by KCC to the Company (which is eliminated
on consolidation) into equity or forgiving a portion of such debt.
Any such outcome would impact the distribution of future cash flows
earned by KCC, which might in turn have a materially adverse impact
on the Company but would not be expected to have a material impact
on the assets, liabilities and net assets of the Company and would
be expected only to result in a shift within equity attributable to
shareholders of the Company and non-controlling interests.
The regularization of the capital deficiency can be effected by
the Company on its own initiative or through negotiations with
Gécamines. If the Company and KCC have taken the necessary steps to
regularise the deficiency and this is confirmed by KCC's statutory
auditor on or before the day on which the court renders a judgment
on the merits, the court cannot issue a dissolution order.
As a consequence of the completion of the first train of the
Whole Ore Leach project (the "WOL Project") and subsequent
operational ramp-up, KCC is generating positive operating cash
flow. KCC remains liquid due to operating cash flows and its
guarantees from its ultimate parent shareholder. As such, all
obligations to KCC's creditors are being honoured, and the company
is meeting all of its commercial obligations. Based on current
projections, cash flows of KCC are expected to be sufficient to
allow the repayment of outstanding shareholders debt and to fund
distributions to shareholders, including Gécamines.
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.
Forward-looking statements in this press release include: the
Company's belief that it has several options to remedy KCC's
capital deficiency and avoid KCC's dissolution; the Company's
intention to continue to attempt to engage in discussions with
Gécamines and take all other necessary steps to ensure the
continuation of the operations of KCC and protect its rights under
the law and the JV Agreement; the Company's belief that options for
regularizing the deficiency, including the conversion of a portion
of existing intercompany debt owed by KCC to the Company (which is
eliminated on consolidation) into equity or forgiving a portion of
such debt, could impact the distribution of future cash flows
earned by KCC, which might in turn have a materially adverse impact
on the Company; and the Company's expectation that, based on
current projections, cash flows of KCC are expected to be
sufficient to allow the repayment of outstanding shareholders debt
and to fund distributions to shareholders, including
Gécamines.
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, assumptions, 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. Such
factors include, among others: unforeseen circumstances that could
impact the Company's ability to implement one or more options to
remedy KCC's capital deficiency; the outcome of the legal
proceedings commenced by Gécamines being subject to the discretion
of the Court, which is beyond the control of the Company; the
financial implications to the Company of the proceedings being
materially different than the Company's current expectations; the
Company's ability to achieve expected cash flows; as well as those
factors disclosed in the Company's current annual information form
and other publicly filed documents. 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