Katanga Mining Limited
TSX : KAT

Katanga Mining Limited

November 06, 2007 09:00 ET

Recommended Merger of Katanga and Nikanor to Create a Leading African Copper and Cobalt Company

LONDON, UNITED KINGDOM--(Marketwire - Nov. 6, 2007) -

Not for release, publication or distribution in or into any jurisdiction where to do so would constitute a violation of the relevant laws of any such jurisdiction

The Boards of Katanga Mining Limited (TSX:KAT) and Nikanor PLC are pleased to announce today that they have reached agreement on the terms of a recommended Merger of the two companies. The Merger will create a company with a combined market capitalisation of approximately US$3.3 billion and the potential to become by 2011 Africa's largest copper producer and the world's largest cobalt producer.

Summary

- The Merger will bring together the adjacent properties in the Democratic Republic of Congo (DRC) owned by Katanga and Nikanor, which were previously part of the same mine complex, to create a major single-site operation.

- Substantial high-grade resources of both copper and cobalt will create an exceptional foundation for a large-scale, low-cost and long-life operation.

- Based on work completed to date, the Merged Company intends to develop a unified mine complex with annual output approaching 400,000 tonnes of copper and 40,000 tonnes of cobalt by 2011. It is believed that the combined operations will be the largest single-site project in the world producing both copper and cobalt.

- The Merger is expected to deliver significant value enhancement for shareholders of both companies resulting from capital savings, lower unit operating costs and increased production.

- More cost effective operations are expected to increase revenue to the DRC government. The coordination of the Merged Company's infrastructure spend and corporate social responsibility activities will also be more effective in producing positive change for the communities surrounding the operations.

- Officials in the DRC have been kept apprised of the potential Merger and have expressed their support.

- The Merger will be implemented by way of an offer by Katanga for Nikanor together with a Cash Return to Nikanor Shareholders of US$452 million.

- The Merged Company will be well-funded, with a pro forma cash balance of approximately US$745 million as at 30 September 2007, after taking account of the Cash Return.

- The Merged Company will follow Katanga and Nikanor's existing strategies of financing their projects through a mixture of debt and equity. The level of additional financing required will be determined as part of a combined business plan, but it is expected that production from Katanga and a phased approach to capital expenditure will result in a lower and delayed requirement for additional financing than for Nikanor standalone.

- Katanga has received irrevocable undertakings to support the Merger and accept the Offer from Glencore Finance, RP Capital Entities with interests in Nikanor Shares, Oakey Invest Holdings Inc. and Pitchley Properties Limited representing 78.4 per cent. of Nikanor Shares in issue.

- Nikanor has received irrevocable undertakings from Arthur Ditto, Tain Holdings Limited, George Forrest and RP Capital Entities with interests in Katanga Shares representing 48.1 per cent. of Katanga Shares in issue to support the Merger and not to accept any competing proposal.

- In addition, Arthur Ditto and Tain Holdings Limited have undertaken to vote in aggregate in respect of 6,843,000 Katanga Shares, representing 8.7 per cent. of Katanga Shares in issue, in favour of the Merger at the Katanga extraordinary general meeting.

- The Merged Company will be led by Arthur Ditto as President and CEO supported by executives to be drawn from both companies. An integration committee consisting of four members, two from Katanga and two from Nikanor, will be set up to oversee the integration of the two businesses.

- The Merged Company, which will retain the name Katanga Mining Limited, will make an application to obtain a primary listing on the Main Market of the London Stock Exchange within 5 months of the Effective Date. The Merged Company will therefore have primary listings on the TSX and the Main Market of the London Stock Exchange.

Arthur Ditto, proposed President and CEO of the Merged Company, stated: "Combining the assets of Katanga and Nikanor will create an industry leader in both copper and cobalt. We believe it offers the opportunity for a dramatic increase in value for shareholders of both companies and is a transaction where the whole is definitely greater than the sum of the parts. Transacting the deal now gives us the best opportunity to lower the overall capital spending and deliver maximum benefit from a consolidated suite of operations. We will have a much more efficient business model with greater benefits for all stakeholders including employees, shareholders, and the DRC".

Jonathan Leslie, Executive Chairman of Nikanor, said: "Individually, Nikanor and Katanga both present compelling copper and cobalt investment cases; combined, they transform into an African champion with phenomenal resources and potential. This merger is precisely the type of transaction we envisaged when we listed the company more than year ago, creating a premier publicly traded copper and cobalt company and generating significant operating and financial synergies. The combined company will create value for shareholders and other stakeholders alike and be even better placed to help play a positive role in the development of the Katanga Province and as a long-term partner to GTcamines and ultimately to the DRC".

Martin Kabwelulu, Minister of Mines of the DRC, said: "The DRC government would like to highlight its support for the merger of Katanga and Nikanor. This transaction highlights the quality of Katanga and Nikanor's deposits and provides a natural platform between these two projects for the development of these assets into a major copper and cobalt producer. The combination of operational synergies between these two companies will result in increased financial benefits for the DRC state and shareholders. The DRC has 10 per cent. of the world's copper reserves and less than 1 per cent. of its production. This transaction is a significant milestone in the transformation of the DRC's mining sector towards production. The DRC government welcomes the merger as proof of the confidence of the business community in the future of the DRC mining sector".

Merger terms

The Merger will be effected by way of the Offer and Cash Return to Nikanor Shareholders. Under the terms of the Merger Nikanor Shareholders will be entitled to receive for each Nikanor Share:

0.613 New Katanga Shares, and

US$2.16 in cash by way of the Cash Return.

Following the Merger, Nikanor Shareholders will hold 60 per cent. and Katanga Shareholders 40 per cent. of the Merged Company, calculated on a fully diluted basis, excluding the recently announced convertible loan from Glencore Finance. Based on the closing share prices of Katanga (on the TSX) and Nikanor (on AIM) on 5 November 2007, the Merged Company would have a combined market capitalisation of US$3.3 billion after the proposed Cash Return, calculated on the fully diluted number of shares for both companies. The cash element of the Merger will be paid by way of the Cash Return of US$452 million from Nikanor's existing cash resources.

Katanga and Nikanor have entered into an Implementation Agreement in relation to the Merger, which contains provisions regarding the implementation of the Merger and certain assurances and confirmations between the parties.

This summary should be read in connection with the attached Announcement and Appendices. Appendix I of this Announcement sets out the conditions and principal further terms of the Offer. Appendix II of this Announcement contains information on sources and bases used in this summary and the following Announcement. Certain terms used in this summary are defined in Appendix IV of this Announcement.

Analyst and Investor Conference Calls

Analysts and investors will be invited to join a conference call, which will be held at 3.00 p.m. UK (10.00 a.m. EST).

Media Conference Calls

Journalists will be invited to join a media conference call, which will be held at 2.30 p.m. UK (9.30 a.m. EST).

About Katanga

Katanga Mining Limited operates a major copper-cobalt mine complex in the DRC on behalf of the Kamoto Copper Company joint venture, in which it holds a 75 per cent. interest. Copper production is expected to begin in December 2007 and the site is expected to reach full production in 2011, when 150,000 tonnes of refined copper and 8,000 tonnes of refined cobalt will be produced a year. Katanga is listed on the TSX under the symbol KAT.

For further information on Katanga go to www.katangamining.com and www.sedar.com.

About Nikanor

Nikanor PLC holds 75 per cent. of a joint venture at Kolwezi in the DRC. The company's key mine is KOV, containing one of the world's largest high quality copper and cobalt ore bodies. Nikanor is rehabilitating this well documented brownfield site and intends to build a major state of the art copper and cobalt refiner to produce 250,000 tonnes per year of LME A-grade copper cathode and 27,500 tonnes per year of cobalt products. Nikanor is admitted to AIM.

For further information on Nikanor go to www.nikanor.co.uk

CIBC World Markets plc, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Katanga and no-one else in connection with the Offer and will not be responsible to anyone other than Katanga for providing the protections afforded to clients of CIBC World Markets plc or for providing advice in relation to the Offer or any other matter referred to in this Announcement.

JPMorgan Cazenove Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Nikanor and no-one else in connection with the Offer and will not be responsible to anyone other than Nikanor for providing the protections afforded to clients of JPMorgan Cazenove Limited or for providing advice in relation to the Offer or any other matter referred to in this Announcement.

The directors of Katanga accept responsibility for the information contained in this Announcement other than the information relating to Nikanor. To the best of the knowledge and belief of the directors of Katanga (who have taken all reasonable care to ensure that such is the case), the information contained in this Announcement for which they accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information.

The directors of Nikanor accept responsibility for the information contained in this Announcement relating to Nikanor. To the best of the knowledge and belief of the directors of Nikanor (who have taken all reasonable care to ensure that such is the case), the information contained in this Announcement for which they accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information.

Persons who are resident in the United Kingdom should note the following:

(a) The Offer will not be subject to the jurisdiction of the Panel but will be conducted generally in accordance with the provisions of the Code save for exceptions agreed between Nikanor and Katanga.

(b) The formal offer and the Offer Document will not constitute a prospectus for the purposes of the Prospectus Rules published by the Financial Services Authority of the United Kingdom (the "FSA"). Accordingly, the formal offer and the Offer Document will not be reviewed or approved by the FSA or by London Stock Exchange and it is not intended that any action will be taken by Katanga or by CIBC World Markets plc that would permit a public offer of Katanga Shares to be made in the United Kingdom which would require an approved prospectus in accordance with FSMA and the Prospectus Rules.

(c) The Offer will be made to, and acceptance of Nikanor Shares will be accepted from, only those shareholders in the United Kingdom who are (or who are acting on behalf of), and who are able to establish to the satisfaction of Katanga that they are (or are acting on behalf of): "qualified investors" within the meaning of section 86(7) of FSMA, or (ii) persons to whom the Offer may otherwise be made or directed without an approved prospectus having first been made available to the public in the United Kingdom. UK shareholders receiving the formal offer and the Offer Document should consult with their legal advisers to determine whether they are eligible as "qualified investors" or are otherwise able to receive and accept the Offer.

Unless otherwise determined by Katanga, the Offer will not be made, directly or indirectly, in or into, or by the use of mails or by any means or instrumentality (including, without limitation, by means of telephone, facsimile, telex, internet or other forms of electronic communication) of interstate or foreign commerce of, or any facility of a national state or other securities exchange of, the United States, Canada, Australia or Japan or any other Restricted Jurisdiction and the Offer will not be capable of acceptance by any such use, instrumentality or facility or from within those jurisdictions. Accordingly, copies of this Announcement and formal documentation relating to the Offer are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, transmitted, distributed, sent or accessed in or into or from the United States, Australia or Japan or any other Restricted Jurisdiction. Persons receiving this Announcement (including without limitation custodians, nominees and trustees) should observe these restrictions and must not mail or otherwise forward, transmit, distribute or send it in or into or from the United States, Australia or Japan or any other Restricted Jurisdiction. Doing so may render invalid any purported acceptance of the Offer. The availability of the Offer may be affected by the laws of the relevant jurisdictions in which they are located or of which they are citizens. Such persons should inform themselves of, and observe any, applicable legal or regulatory requirements of their jurisdictions.

The New Katanga Shares have not been, and will not be, registered under the US Securities Act 1933, as amended (the "Securities Act"), or under the securities laws of any state, district, province or other jurisdiction of the United States, Australia or Japan or any other Restricted Jurisdiction. Accordingly, unless an exemption under relevant securities laws is applicable, the New Katanga Shares are not being, and may not be, offered, sold, resold, delivered, distributed or otherwise transferred, directly or indirectly, in or into the United States, Australia or Japan or any other Restricted Jurisdiction, or require registration thereof in, such jurisdiction, or to or for the account or benefit of any US Person (as defined in Regulation S under the Securities Act) or resident of Australia or Japan).

This Announcement has been prepared in accordance with English law and information disclosed may not be the same as that which would have been prepared in accordance with the laws of jurisdictions outside England.

This Announcement is not intended to, and does not, constitute or form any part of an offer to sell or an invitation to purchase or subscribe for any securities or the solicitation of an offer to buy or subscribe for any securities pursuant to the Offer or otherwise. The Offer will be made solely on the basis of the Offer Document and the Form of Acceptance accompanying the Offer Document, which will contain the full terms and conditions of the Offer, including details of how the Offer may be accepted. The Offer Document will be posted to those shareholders able to receive it in due course. Those shareholders receiving the Offer Document are strongly advised to read it in full, as it will contain important information.

The contents of this document must not be construed as legal, business, tax or investment advice. Each prospective recipient of New Katanga Shares should consult his, her or its own legal adviser, financial adviser, tax adviser or independent financial adviser for legal, financial, tax or investment advice.

The price and value of securities can go down as well as up. If you are in any doubt as to the action you should take, you are recommended to seek your own personal financial advice immediately from your stockbroker, bank manager, solicitor, accountant, fund manger or other independent financial adviser authorised under FSMA if you are in the United Kingdom, or, if you are not, from another appropriately authorised independent financial adviser.

Cautionary and Forward-Looking Statements

This press release contains "forward-looking statements", within the meaning of the United States Private Securities Litigation Reform Act of 1995 and similar Canadian legislation, concerning the business, operations and financial performance and condition of Katanga. Forward-looking statements include, but are not limited to, statements with respect to anticipated developments in Katanga's and the Merged Company's operations in future periods; planned exploration activities; the adequacy of Katanga's and the Merged Company's financial resources and other events or conditions that may occur in the future; estimated production and synergies; the benefits of the development potential of Katanga's and the Merged Company's properties; the future price of copper and cobalt; information concerning the interpretation of drill results; the estimation of mineral reserves and resources; the realization of mineral reserve estimates; the timing and amount of estimated future production; costs of production; capital expenditures; success of exploration activities; permitting time lines and permitting, mining or processing issues; currency exchange rate fluctuations; government regulation of mining operations; environmental risks; unanticipated reclamation expenses; title disputes or claims; and limitations on insurance coverage. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations 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 are based on the opinions and estimates of management as of the date such statements are made, and they are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Katanga and the Merged Company to be materially different from those expressed or implied by such forward-looking statements, including but not limited to risks related to: unexpected events during construction, expansion and start-up; variations in ore grade, tonnes mined; delay or failure to receive board or government approvals; timing and availability of external financing on acceptable terms; risks related to international operations; conclusions of economic evaluations; changes in project parameters as plans continue to be refined; future prices of copper and cobalt; possible variations in ore reserves, grade or recovery rates; failure of plant, equipment or processes to operate as anticipated; political unrest and insurrection; acts of terrorism; accidents, labour disputes and other risks of the mining industry; delays in the completion of development or construction activities, as well as those factors discussed in or referred to in the current annual Management's Discussion and Analysis and current Annual Information Form of Katanga filed with the securities regulatory authorities in Canada and available at www.sedar.com. Although management of Katanga has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such 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. Neither Katanga nor Merged Company undertakes to update any forward-looking statements that are incorporated by reference herein, except in accordance with applicable securities laws. Comparative market information is as of, or a date prior to, the date of this presentation.

Dealing disclosure requirements

The Nikanor Board has determined that Rule 8 disclosures should not be required in connection with the Merger.

Contact Information

  • Investor Contacts: Katanga
    Arthur H. Ditto
    Chairman, President & CEO
    +44 (0)20 7440 5800
    or
    Katanga
    Steve Jones
    Senior Vice President & CFO
    +44 (0)20 7440 5800
    or
    Katanga
    Anu Dhir
    VP, Corporate Development
    +44 (0)20 7440 5800
    or
    Investor Contacts: Nikanor
    Jonathan Leslie
    Executive Chairman
    +44 (0)20 7529 5800
    or
    Nikanor
    Peter Sydney-Smith
    Finance Director
    +44 (0)20 7529 5800
    or
    Nikanor
    Richard Boorman
    Head of Investor Relations
    +44 (0)20 7529 5800
    or
    CIBC World Markets plc,
    financial adviser to Katanga
    Mick Oliver
    +44 (0)20 7234 6000
    or
    CIBC World Markets plc,
    financial adviser to Katanga
    Jonathan Stephens
    +44 (0)20 7234 6000
    or
    JPMorgan Cazenove,
    financial adviser and corporate broker to Nikanor
    Ian Hannam
    +44 (0)20 7588 2828
    or
    JPMorgan Cazenove,
    financial adviser and corporate broker to Nikanor
    Adam Brett
    +44 (0)20 7588 2828
    or
    JPMorgan Cazenove,
    financial adviser and corporate broker to Nikanor
    Joe Seifert
    +44 (0) 20 7588 2828
    or
    Media Contacts: Katanga
    David Orford
    Manager, Communications
    +44 (0)20 7440 5828 or Mobile: +44 (0)7983 428920
    or
    Parkgreen Communications
    Simon Robinson
    +44 (0)20 7851 7480 or Mobile: +44 (0)7887 985671
    or
    Fleishman-Hillard
    Caroline Spivak
    (416) 645-8185 or Mobile: (416) 371-9740
    or
    Media Contacts: Nikanor
    Citigate Dewe Rogerson
    Kate Delahunty
    +44 (0)207 282 2934 or Mobile: +44 (0)7775 560812
    or
    Citigate Dewe Rogerson
    George Cazenove
    +44 (0)207 282 2870 or Mobile: +44 (0)7834 767054