TMS Ship Finance & Trade Conference 2020

Katanga Mining announces land agreement

(Posted on 23/12/19)

Glencore refers to the announcement by Katanga Mining Limited ("Katanga") in which it announced that Katanga's 75% subsidiary Kamoto Copper Company (“KCC”) has entered into an agreement with La Générale des Carrières et des Mines (“Gécamines”), its 25% joint venture partner in KCC, to acquire from Gécamines a comprehensive land package covering areas adjacent to KCC’s existing mining concessions.

The land includes multiple blocks over the preferred location for construction of a new long-term tailings facility, and multiple other blocks that will enhance KCC’s ability to more efficiently operate its mines, facilities and other key infrastructure requirements. If this agreement is implemented then the risks for KCC’s operations resulting from land constraints, which are described in the Company’s 43-101 Technical Report issued on 7 November 2019, would be mitigated.

KCC will pay up to USD 250 million to acquire the land, the total amount payable being dependent on delivery of title to the various different land areas.

The agreement also provides for (among other matters):

(i) an initial payment of USD 150 million to Gécamines which will be fully offset against the purchase price consideration or other payment obligations of the Company to Gécamines from time to time,

(ii) obligations on KCC to remove tailings (estimated at circa 15m dmt), currently in a sub-section of these areas, to another suitable proximate location,

(iii) warranties and indemnities from Gécamines concerning the land interests to be transferred,

(iv) contingent obligations to pay “pas de porte” payments to Gécamines if KCC declares a JORC compliant reserve or otherwise elects to mine any resources in certain of the acquired land areas, on substantially the same terms as in the Settlement Agreement announced by KCC in June 2018. An amount of up to USD 120 million of the consideration may be offset against these pas de porte obligations, and

(v) a new royalty to Gécamines of 2.5% of net sales from the acquired land areas if KCC elects to mine any resources in the acquired land areas.

KCC expects to satisfy the consideration payments from existing liquidity. The agreement anticipates the title transfers to be effected during the course of 2020.

The entering into of this acquisition agreement between Katanga and Gécamines constitutes a smaller related party transaction as defined in UK Listing Rule 11.1.10 because Gécamines holds more than 10% of the voting rights in a material subsidiary of Glencore. Accordingly, Glencore has obtained written confirmation from a sponsor under the UK Listing Rules that the terms of the agreement with Gécamines are fair and reasonable as far as the shareholders of Glencore are concerned.