Glencore Unveils $5.6 Billion Restructuring of Congo's Katanga Mining
June 12 2018 - 02:12PM
Dow Jones News
By Scott Patterson
Swiss mining giant Glencore PLC unveiled a sweeping $5.6 billion
restructuring of its troubled Congo copper company, Katanga Mining
Ltd., resolving a heated dispute with Congo's state-run mining
company about a massive debt load it has built up over the past
decade.
Glencore said Katanga Mining will issue $5.6 billion in stock,
which it will use to retire debt. The company had been saddled with
$9.2 billion in high-interest debt, most of which is owed to
Glencore.
The move is the latest in a long-running saga involving Katanga
Mining, one of Glencore's flagship Congolese copper mines. The
operation has been plagued with recurring spills and power outages
as it struggled to meet ambitious production targets. Glencore
suspended operations at Katanga in 2015 to revamp its
infrastructure and boost production.
Along the way, Katanga Mining ran up a staggering debt load that
Congo's state-run mining company, Gecamines, said created a
shortfall in capital that violated Congolese law.
In April, Gecamines brought Katanga Mining to court in Congo,
seeking to dissolve its Kamoto Copper Co. subsidiary, known as KCC,
for its failure to resolve the capital deficiency. Katanga Mining
owns 75% of KCC, which operates a giant copper and cobalt mine in
Congo's southeastern copper belt. Gecamines owns the remaining
stake. Glencore owns 86% of Katanga Mining.
Glencore said Gecamines will receive a one-time payment of $150
million to resolve a number of "historical commercial disputes."
Glencore will also waive a $285 million payment Gecamines had
agreed to make several years ago.
Gecamines, in return for the concessions, has agreed to withdraw
from its lawsuit, Glencore said.
Glencore has faced numerous headaches involving Katanga Mining
in recent years. In November, Glencore shuffled Katanga's board
following an internal review that found weaknesses in Katanga's
controls over financial reporting. Three Katanga directors stepped
down from the board following an internal review that found
"material weaknesses" in the company's controls over financial
reporting, according to a Glencore announcement at the time.
The move came amid an investigation by Canada's Ontario
Securities Commission, or OSC, into governance practices at Katanga
Mining. The Wall Street Journal reported last July that Glencore is
subject to an investigation by Canada's OSC regarding payments
Katanga Mining made to a company owned by an Israeli
businessman.
Write to Scott Patterson at scott.patterson@wsj.com
(END) Dow Jones Newswires
June 12, 2018 14:57 ET (18:57 GMT)
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