Katanga Mining Ltd., together with its 75% operating subsidiary in the Democratic Republic of the Congo (DRC), Kamoto Copper Co. (KCC), has entered into an agreement, effective June 14, with joint venture partner, DRC state-owned company La Générale des Carrières et des Mines (Gécamines) to terminate the legal proceedings brought forward by Gécamines and resolve KCC’s previously disclosed capital deficiency.
Under the agreement, Gécamines, Katanga and KCC agreed on a recapitalization plan that will allow the reconstruction of the net equity of KCC and satisfy the requirements provided for by DRC corporate law, subject to the satisfaction of certain conditions precedent. Gécamines will withdraw from the legal proceedings it started on April 20 in the Kolwezi Commercial Court to dissolve KCC.
“We are pleased to have reached an agreement to resolve the KCC capitalization issues and preserve and revitalize the partnership between KCC and Gécamines,” said Hugh Stoyell, non-executive chairman, Katanga Mining. “Throughout the discussions and negotiations that resulted in this settlement, we have been well supported by our majority shareholder Glencore plc, and we look forward to the next phase of development at KCC, which we believe will provide significant benefits to Katanga and its stakeholders, as well as Gécamines and all stakeholders in the DRC.”
Under the agreement, there will be a one-time settlement payment by Katanga to Gécamines of US$150 million; restructuring of all long-term debt and commercial offtake prepayment obligations owed by KCC and the reduction of KCC’s total debt to a maximum of US$3.5 billion; certain amendments to the dividend payment and free cash flow provisions, including an amortization schedule for the repayment of the residual debt; the waiver by KCC of certain contractual rights relating to the replacement reserves, which relieves Gécamines of the obligation to transfer such replacement reserves or provide equivalent financial compensation to KCC in the amount of US$285 million; and the waiver by KCC of certain contractual rights to claim the reimbursement of paid contractors’ invoices amounting to approximately US$57 million in connection with the replacement reserves exploration program, and agreement by KCC to make an additional payment to Gécamines of approximately US$41 million in relation to outstanding expenses incurred by Gécamines as part of the replacement reserves exploration program.