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Gold/Mining/Energy : Mining News of Note -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (38111)	6/4/2009 12:17:03 PM
From: LoneClone	Read Replies (1) \| Respond to of 192884

Katanga Mining's rebirth? USD 270m of debt extinguished Exciting: "They have a lean and mean structure in Kolwezi and it is producing results. They have a lot of baggage but their operating fundamentals are very sound". Author: Barry Sergeant Posted: Tuesday , 02 Jun 2009 JOHANNESBURG - mineweb.co.za Katanga Mining, operator of one of the world's finest brownfields copper (and cobalt) deposits, today issued a massive 971m new common shares, extinguishing USD 270m in debt, and freeing up the company for a far brighter future than has been the case for many months. Copper prices collapsed from around USD 4.10/lb in mid 2008 to USD 1.28/lb by the end of the year, precipitating a collapse of the nascent copper-cobalt rebirth in Katanga Province, Democratic Republic of the Congo. Only the very strongest companies, Freeport-McMoRan (at 58%-held Tenke Fungurume) and First Quantum (at 65%-held Kolwezi tailings) had the balance sheets to continue with build plans; Tenke, a new USD 1.8bn mine, in Phase I, recently produced its first copper cathode. But veterans of the Katanga Province mining scene - such as it is - have been keeping a close eye on Katanga Mining, mindful also that copper has zoomed to around USD 2.30/lb in the past while. One patient observer says that Katanga Mining is the exciting one: "They have a lean and mean structure in Kolwezi and it is producing results. They have a lot of baggage but their operating fundamentals are very sound". Today's debt-for-equity swap is in line with Katanga Mining's plans announced in April, where it also sought to embark on a USD 250m rights issue; that should be complete by the end of this month. Today's swap increases Katanga Mining's outstanding common shares massively from 206m to 1.177bn shares. When the new shares are listed, in due course, Katanga Mining's market value (capitalisation) would increase to some USD 850m, from about USD 149m. After today's exchange of debt for equity, Katanga Mining's only material debt is USD 94.5m (as of 31 December 2008) in debentures. The pending rights issue has effectively been priced at USD 0.35 a share, sharply lower than current trading levels around CAD 0.78 a share. Following a series of mishaps, aggravated by the collapse in copper and cobalt prices, Katanga Mining's market value fell spectacularly from a peak of about USD 2.2bn in 2008 to as little as USD 33m. Katanga Mining reported a tough time for the first quarter of 2009; copper production was 8,715 tonnes for the quarter, and cobalt production was at 488 tonnes. Company guidance for 2009 was left unchanged at 45,000 tonnes of copper cathode and 4,000 tonnes of cobalt metal. While the company reported a net loss for the quarter ended 31 March 2009, of USD 52m, it remains on track to complete its Phase 2 within budget, and to increase production capacity to 70,000 annual tonnes of copper by September 2009. It has been a tough story for this company, all right. On 24 October 2008 Katanga Mining announced that it had "commenced a review of capital expenditure commitments with a focus on optimising its development programme considering current market conditions". On 12 August 2008 Katanga Mining had said that in line with (yet another) feasibility study, it had "mandated a group of four banks to arrange and underwrite Senior Debt Facilities in an amount up to USD 550m. Final approval and signing of the facility agreement is anticipated by year end 2008". Katanga Mining had USD 352m in cash on its balance sheet at 30 June 2008, along with USD 157m in convertible debt (now all gone), and USD 115m (now reduced) in debentures, a kind preferred debt. Production at Katanga Mining restarted in late 2007; by 2011, Katanga Mining had aimed to produce over 300,000 tons of refined copper and over 30,000 tons of refined cobalt a year Earlier in 2008, Katanga Mining merged with Nikanor, owner of the KOV pit, an integral part of the original Katanga Mining property. Nikanor was listed in London in July 2006, when it raised USD 380m in cash; it then raised a further USD 777m a year later. Much of the second tranche came by way of Glencore (now effectively the controlling force of Katanga Mining), the Switzerland-based commodities trader and resources investor. When Nikanor merged with Katanga Mining, USD 452m in cash was returned to Nikanor shareholders as part of the merger deal, which included Nikanor shareholders then holding 60% of the merged entity. Within months, Katanga Mining was in the news talking about the possibility of raising hundreds of millions of dollars in debt. Asked to clarify this at the time, a spokesperson for Katanga Mining stated: "We are now discussing a facility of up to USD 550m to be drawn down in 2009 and 2010. At the end of March [2008] we had USD 463m in cash, so we are not currently short of cash. We did not need to be sitting on a larger cash position when we could repay equity and raise cheaper debt as we need it for the project". See link above for table