ZUG, Switzerland, June 15, 2018 /CNW/ - Katanga Mining
Limited (TSX: KAT) ("Katanga" or the
"Company") today provides an update on its announcement of
April 27, 2018 in respect of freezing
orders filed against Katanga's 75% subsidiary, Kamoto Copper
Company ("KCC"), by Ventora Development Sasu ("Ventora"), a company
affiliated with Mr. Dan Gertler.
Katanga, in conjunction with Glencore, has carefully considered
its various legal and commercial options in connection with its
dispute with Ventora and its obligations towards Africa Horizons
Investments Limited ("AHIL"), a company also affiliated with Mr.
Dan Gertler, as well as to its
shareholders, customers and other shared stakeholders including the
communities in which they operate in the Democratic Republic of the Congo ("DRC").
Based on its review, Katanga has determined that in the
circumstances the only viable option, for its sole operation,
KCC, to avoid the material risk of seizure of its assets
under DRC court orders is for KCC to pay the relevant royalties as
and when they become due to Ventora in non-US dollars, without
involving US persons, in order to discharge its obligations under
the terms of the pre-existing contracts with AHIL previously
disclosed by Katanga. KCC has therefore entered into a settlement
deed with AHIL and Ventora pursuant to which the parties have
agreed to withdraw all pending and threatened litigation between
them. KCC has also acknowledged the assignment by AHIL to Ventora
of the royalties initially owed by KCC to AHIL.
Katanga believes that payment in non-US dollars of royalties to
Ventora without the involvement of US persons would appropriately
address all applicable sanctions obligations
Katanga is a substantial investor and partner in the DRC and is
committed to sustainable mining, creating employment and supporting
local businesses, thereby providing substantial revenues to local
and national government and making voluntary contributions to
improve living standards in the communities in which it
operates.
Katanga is a significant producer of copper and cobalt, a metal
that is of critical importance for batteries for electric vehicles
and portable electronics as well as essential technology, defense
and industrial applications. Katanga's operations are a significant
source of industrial cobalt and guarantees the provenance of its
production material and the exclusion of child labour or conflict
minerals from the supply chain.
Background
On April 27, 2018, Ventora served
in the DRC a freezing order against KCC for approximately
US$2.28 billion. Ventora alleged that
KCC had breached an agreement between KCC, La Générale des
Carrières et des Mines ("Gécamines") and AHIL pursuant to which it
alleged KCC was required to make royalty payments to Ventora.
Ventora asserted that if its claim was upheld it would be entitled
to damages of approximately US$2.28
billion, which it alleged was the value of the future
royalties due to it under the agreement.
On April 28, 2018, Ventora
obtained from the Kolwezi Commercial Court an injunction to pay
against KCC in the amount of US$2.86
billion (an increase of US$572
million for alleged legal fees), which, if the injunction
had become final, would have potentially enabled Ventora to
permanently seize assets at the KCC mine up to the amounts of the
injunction. These assets seizures would have severely disrupted the
mine and enabled Ventora to seize all productive assets at the
mines, including mining titles.
Further information on agreements with Ventora and
AHIL
In December 2017, the United States government designated Mr.
Dan Gertler and affiliated
companies, including AHIL, as specially designated nationals
("SDNs"), thereby imposing blocking sanctions on them and companies
owned 50% or more by them.
As previously disclosed, KCC has an obligation under the
joint-venture agreement between Katanga and Gécamines to pay
royalties quarterly at a rate of 2.5% of "net sales" from the KCC
mine, subject to certain deductions. When the Gertler-affiliated
entities acquired these rights from Gécamines in January 2015, KCC became a party to an agreement
with Gécamines and AHIL, which was concluded prior to the
designation of Mr. Gertler and AHIL as SDNs.
Katanga estimates that the royalties for 2018 will be
approximately €10 million per quarter and then for 2019
approximately €16.5 million per quarter. KCC made a pre-payment of
royalties to AHIL in 2015, and the current royalties payable are
offset against the remaining balance outstanding under such
pre-payment. It is expected that the next royalty payment
from KCC to Ventora will be in 2019.
As explained above, AHIL has assigned its right to receive
royalties to Ventora such that Ventora will be the recipient of
royalties at KCC with immediate effect.
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 expected
treatment by the U.S. Government of any future royalty payments to
Ventora or AHIL by KCC; the ultimate settlement of the disputes
between Katanga, AHIL and Ventora and withdrawal of same from the
relevant courts; Katanga's expectation that it will make ongoing
payments of relevant royalties in the manner described herein;
Katanga's belief that payment in non-U.S. dollars of royalties to
Ventora without the involvement of U.S. persons would appropriately
address all applicable sanctions obligations and is necessary to
avoid the material risk of seizure of its mining assets under DRC
court orders; Katanga's estimate that the royalties for 2018
will be approximately €10 million per quarter and then for 2019
approximately €16.5 million per quarter; and Katanga's expectation
that the next royalty payment from KCC to Ventora will be in
2019.
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. The key assumptions that have been made
in connection with the forward-looking statements include
the following: the U.S. government taking no
action with respect to the payment of relevant royalties by KCC to
companies affiliated with Dan
Gertler; legal issues surrounding the purported assignment
of certain rights under an agreement between KCC, Gécamines and
AHIL to Ventora,; Katanga's current estimates of "net sales" will
prove to be accurate; and the outcome in DRC courts of these and
related matters.
Forward-looking statements involve known and unknown risks,
future events, conditions, uncertainties 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: the treatment of ongoing royalty payments by KCC to
companies affiliated with Dan
Gertler being uncertain; the difficulty of predicting "net
sales" and future cash flows; and regulatory and judicial risks.
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