12 11 11 Katanga gets $635 million to build world’s largest cobalt mine

 
 Press Release:
ZUG, SWITZERLAND, Nov. 11, 2011 /CNW/ – Katanga
Mining Limited (TSX: KAT; KAT.NT) (“Katanga” or the “Company”) today announced
the following:
 

• Financial results for the third quarter of 2011.  Katanga’s Q3 2011
  Financial Statements and Management’s Discussion and Analysis will be filed on
  SEDAR and later available under Katanga’s profile at www.sedar.com.
• Approval of the Updated Phase 4 Expansion (as described below) of its copper
  cobalt project.
• A commitment from Glencore
  International AG (“Glencore“), to provide up to $635.5 million in new loan facilities with an
  interest rate of 10% per annum to fund the Updated Phase 4 Expansion not covered
  by the Company’s cash flows as well as to refinance the Company’s outstanding
  Canadian $115 million of 14% debentures (the
  “Commitment“).

Highlights during the three months (“Q3″)
ended September 30, 2011

Mining

• During Q3 2011, the Company mined 1,239,695 tonnes of ore at a grade of
  4.29% resulting in contained copper in ore mined of 53,131 tonnes, 64% higher
  than Q3 2010.  For Q3 YTD 2011, copper in ore mined was 157,658 tonnes, a 96%
  increase from Q3 YTD 2010.
• The annualized contained copper in ore mined for Q3 2011 was 212,000 tonnes
  and has allowed an increase in contained copper in strategic stockpiles of
  approximately 21,000 tonnes (when compared to Q2 2011) in anticipation of the
  current wet season.
• Ore mined and hoisted at KTO Underground Mine for Q3 2011 was 398,474
  tonnes, a 21% increase on Q3 2010.  For Q3 YTD 2011, ore mined and hoisted
  totaled 1,197,117 tonnes, an increase of 28% on Q3 YTD 2010.
• Q3 2011 production was adversely affected by the planned shut-down of the
  production shaft for seven days for the Koepe winder upgrade which was
  successfully completed in September and production post the upgrade has
  increased to budgeted levels.
• A record of 841,221 tonnes of ore was mined at KOV Open Pit for Q3 2011,
  313% above Q3 2010.  This is equivalent to an annualized production capacity of
  3.4 million tonnes which is consistent with the 2013 production rate and the
  ramp up schedule as described in Katanga’s independent technical report
  dated March 31, 2011 (the “Technical Report“). The copper grade
  of ore mined from KOV Open Pit for Q3 2011 averaged 4.48%.
• During Q3 2011, the Company continued to dewater Kamoto East pit and the
  water level to date has dropped by 10.8 meters with 3.6 million cubic meters of
  water having been removed.  The Kamoto East pit dewatering is expected to allow
  for more efficient and cost effective waste management and the potential
  development of the Kamoto East resource using underground mining
  methods.

Processing

• Ore milled at KTC for Q3 2011 was 1,031,151 tonnes, an increase of 35% from
  Q3 2010.  For Q3 YTD 2011, ore milled at KTC was 3,005,936 tonnes, an increase
  of 44% from Q3 YTD 2010.
• The current milling capacity at KTC of 7.68 million tonnes of ore per annum
  is sufficient milling capacity to support the Life of Mine Plan through to 2014
  described in the Technical Report.
• Mill throughput during Q3 2011 was adversely affected by electrical power
  disruption events and water management challenges which are being addressed by
  the Company.  Management has instituted processes to minimize the impact of
  electrical power disruption events on production.
• A 120,000 tonnes per annum concentrate filtration and bagging facility was
  commissioned during Q3 and the Company continues to increase the production of
  oxide concentrate for sale as a finished product.
• Copper produced in metal and concentrate for Q3 2011 totaled 23,690 tonnes,
  an increase of 59% compared to Q3 2010.
• Cobalt produced totaled 593 tonnes, a decrease of 30% compared to the Q3
  2010. The decrease in cobalt production is in line with the lower cobalt head
  grade of the KOV ore.
• Production for Q3 2011 was adversely impacted by roaster maintenance, the
  completion of the expanded oxide repulp system and the issues highlighted
  above.

Financial

• Total sales for Q3 2011, were $129.3 million. The sales figure has been
  adversely affected by an unrealized mark to market adjustment as at September
  30, 2011, of $23.4 million (using a copper price of $7,160 per tonne).
• In addition, the sales value of oxide concentrate available to be shipped
  but not invoiced as at September 30, 2011, amounted to approximately an
  additional $57 million.
• For Q3 2011, the Company generated a gross profit of $11.4 million, net
  income of $20.6 million and cash generated from operating activities of $114
  million.
• Cash and cash equivalents as at September 30, 2011, amounted to $57 million.
• C1 cash costs for Q3 2011 were $2.23 per pound of copper.  C1 cash costs per
  pound of copper are cash costs including mining, processing, administration and
  refining, net of cobalt credits and is a non-IFRS measure – refer to Non-IFRS
  measures in Katanga’s Q3 2011 Management’s Discussion and Analysis.

Human Resources and Corporate

• On September 22, 2011, the Company announced that Mr. Jeffrey Best, the
  Company’s Chief Operating Officer, had been appointed as the Chief Executive
  Officer and Director of the Company to succeed Mr. John Ross.
• On October 11, 2011, the Company announced the promotion of Itamar Machado
  to the position of Chief Operating Officer.
• On August 31, 2011, the Company announced that it has been continued to the
  Yukon Territory from Bermudaeffective August 31, 2011.

Updated Phase 4 Expansion of Katanga’s copper
cobalt project

Consistent with Katanga’s completion of the Phase 3 expansion
of its project described in the Technical Report, Katanga commissioned a front
end engineering and early works report (the “Early Works
Report“). The Early Works Report identified the following
(collectively, the “Updated Phase 4 Expansion“):

• an additional 100,000 tonnes per annum solvent extraction (“SX”) plant, over
  and above the 200,000 tonnes per annum SX plant described in the Technical
  Report, to be constructed in front of the existing Luilu electrowinning plant;
• Katanga reaching higher copper and cobalt production levels sooner than the
  timelines described in the Technical Report;
• an increase in expansionary capital expenditures from approximately $537
  million as described in the Technical Report to approximately $635 million due
  primarily to the inclusion of the additional SX plant and an in-pit crusher at
  KOV Open Pit; and
• the increase of copper production to 270,000 tonnes per annum of LME Grade A
  copper and thereafter the expansion of copper production to 310,000 tonnes per
  annum which the Company intends to proceed with utilizing anticipated cash flows
  from operating activities.

Commitment for up to $635.5 million in New Loan
Facilities

Katanga has received the Commitment from Glencore, or one of
its Group entities, to provide Katanga with new loan facilities of up to $635.5
million (the “Facilities“).  Up to $120 million of the
Commitment is being provided to Katanga as a new term loan facility (the
“Term Loan“) to enable the refinancing of Katanga’s outstanding
Canadian $115 million 14% debentures due November 30, 2013 in accordance with
the provisions of Katanga’s trust indenture datedNovember 20, 2006.  The balance
of the Commitment is being provided to Katanga as a senior secured credit
facility (the “Senior Facility“) to fund the Updated Phase 4
Expansion not covered by the Company’s cash flows.  The Company’s 75% interest
in Kamoto Copper Company SARL (which holds the copper and cobalt project assets)
will be pledged as security for the Senior Facility along with certain other
assets of the Company and its subsidiaries.  As security for the Term Loan and
additional security for the Senior Facility, Katanga will agree, if a Facility
is in default, to complete a deeply discounted rights offering with Glencore
providing a standby commitment, to repay the Facility.  In the case of the
Senior Facility, Glencore has agreed to exercise its right to compel Katanga to
complete the deeply discounted rights offering prior to realizing on Glencore’s
other security.

The Facilities will mature on December 31, 2014 and interest
will be payable on any amount drawn under the Facilities at a rate of 10% per
annum.  The Commitment and the Facilities are subject to, among other things,
final documentation being agreed and usual and customary drawdown conditions
being satisfied.

In addition to the benefits to Katanga of the Updated Phase 4
Expansion, which the Facilities are expected to finance in part, Katanga expects
the Updated Phase 4 Expansion will improve copper recovery, utilize existing
under-utilized plant capacity, and allow Katanga to produce LME Grade A copper
and benefit from the continuity of personnel and competencies involved in the
recently completed Phase 3 expansion of its project.

Katanga’s Corporate Governance and Nominations Committee (the
“Committee“), which is comprised of three independent
directors, has reviewed the proposed Facilities as contemplated by the Charter
of the Committee.  The Committee retained Fasken Martineau DuMoulin LLP,
independent legal counsel, in connection with that review.  Following that
review, the Committee has unanimously determined that entering into the
Facilities is in the best interests of Katanga.

Glencore
beneficially owns, directly or indirectly, or exercises control or direction
over approximately 74% of the issued and outstanding common shares of Katanga. 
Due to this relationship, the Facilities are considered “related party
transactions” as defined by Multilateral Instrument 61-101 – Protection of Minority Security Holders in
Special Transactions (“MI
61-101“).  Katanga is
relying upon the exemption from the requirement to obtain majority of minority
shareholder approval available under MI 61-101 as it has determined that neither
the aggregate of the fair market value of the Facilities, nor the fair market
value of the consideration for the Facilities, exceeds 25% of Katanga’s market
capitalization as calculated and determined in accordance with MI 61-101.  It is
not anticipated that the Facilities will affect the percentage of Katanga’s
securities beneficially owned or controlled by Glencore.

Glencore has made
the Facilities available in the ordinary course of its business.  It may from
time to time acquire additional securities of Katanga, dispose of some or all of
the existing or additional securities it holds or will hold, or may continue to
hold its current position.

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. All dollar amounts are in United States dollars unless otherwise
indicated.