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Glencore to take Katanga private, at a premium

Katanga Mining (TSX: KAT) says it’s agreed to Glencore taking it private, with the major offering a 100% premium for the small number of shares it doesn’t already own.
Glencore to take Katanga private, at a premium Glencore to take Katanga private, at a premium Glencore to take Katanga private, at a premium Glencore to take Katanga private, at a premium Glencore to take Katanga private, at a premium

Underground at Katanga Mining’s majority-owned Kamoto mine in the DRC

Staff reporter

Glencore owns about 99.5% of Katanga, which is focused on copper and cobalt production in the Democratic Republic of Congo.

The major offered C16c per share, double Katanga's April 21 closing price and a 139% premium over the 20-day volume weighted average price.

Katanga has recommended shareholders vote in favour of the amalgamation on June 2, citing reasons including limited trading liquidity, the relative costs of a stock exchange listing, current commodity price risks, ongoing operational risks and lack of financing sources without support from Glencore.

COVID-19 impact

Katanga separately said there were no material disruptions to operations at its 75%-owned Kamoto Copper Company in the first quarter but said it had implemented measures to minimise cash flows, given the "increased macro-economic uncertainty" caused by the COVID-19 pandemic.

It reduced its cobalt guidance for FY20, from 29,000 tonnes to 26,000t, but maintained its copper outlook of 270,000t.

It reported a rise in March quarter copper cathode production to 67,298t, up from 65,402t in the previous quarter due to higher feed grades and improvements at the Luilu refinery.

Total cobalt contained in hydroxide fell from 6,173t to 5,296t due to a decrease in feed grades.

Katanga said it would "likely be materially and adversely impacted" if its operations were disrupted due to COVID-19 restrictions for an extended period and also pointed to the lack of extensive health infrastructure in the DRC.

It was suspending certain capex and discretionary activities, preserving cash flow and put a freeze on hiring new staff.

Katanga said it had cash on hand of US$174 million and had sufficient cash and liquidity to pay up to $250 million for the land acquisition agreed with minor partner Gécamines in December, subject to the resolution of the force majeure declared on March 30 after receiving a court order to not make any payments pending the conclusion of an investigation relating to Gécamines executives. 

Katanga shares have ranged from C5-56c over the past year and closed up 110% yesterday to 15.75c, capitalising it at $9.6 billion (US$6.8 billion).