Central African Mining & Exploration Company Plc

Central African Mining & Exploration Company Plc

August 29, 2007 01:00 ET

Central African Mining & Exploration Company Plc ('CAMEC') Offer to Purchase Katanga Mining

LONDON, UNITED KINGDOM--(Marketwire - Aug. 29, 2007) - CAMEC, the fully integrated exploration, mining and production company, announces that it has today made an offer to purchase all of the issued and outstanding common shares of Katanga Mining Limited ("Katanga") on the basis of 17 common shares of CAMEC for each Katanga Share ("the Offer"). Katanga shares are listed on the Toronto Stock Exchange ("TSX").

On 27 August, the closing trading price of the Katanga Shares on the TSX was C$22.50, and on 28 August, the closing trading price on AIM of the CAMEC Shares was 52p (C$1.05), implying a value for the CAMEC Offer of C$17.80 per Katanga Share at that date. The average Katanga share price for the 30 days prior to CAMEC's announcement on 4 May 2007 that it had acquired a 22% stake in Katanga was $13.30.

Key Points

- As at 28 August, the Offer valued Katanga at C$1,518 million on a fully diluted basis

- CAMEC owns 22% and has reached agreement with certain shareholders representing approximately 32% of the outstanding shares of Katanga pursuant to which such shareholders have agreed to accept the Offer

- The combination of CAMEC with Katanga will create a company with the potential to become the world's largest cobalt producer and one of the largest copper producers in the DRC

- The combined entity will have a strong reserve and resource base and an attractive African exploration and development portfolio

- The merged company will be well placed to benefit from expected further consolidation amongst the developing copper and cobalt producers in the DRC

- Based on publicly announced production targets for both CAMEC and Katanga, the combined entity will have a targeted production capacity of approximately 250,000 tonnes of copper and 20,000 tonnes of cobalt per annum. At full production, CAMEC will produce approximately 60% of the cobalt and Katanga 60% of the copper for the combined entity

- Excluding CAMEC's 22% interest in Katanga, Katanga shareholders will receive approximately 47.1% of the combined entity upon completion (assuming 100% acceptance and prior exercise of all warrants and options)

- The 43-101 technical report prepared by Behre Dolbear International Ltd in conjunction with the Offer has confirmed a current inferred mineral resource of approximately 60.2 million tonnes grading 2.12% copper and 0.49% cobalt on CAMEC's 80% owned 467 and 469 concessions and its 50% share of Mukondo Mountain, all in the DRC. Mineral resources that are not mineral reserves do not have demonstrated economic viability

- As part of its technical report, Behre Dolbear has completed a preliminary assessment valuing CAMEC's 80% interest in 467 and 469 and its 50% interest in Mukondo Mountain at approximately US$959 million (Pounds Sterling 480 million). (i) see footnote

- This represents 39p per CAMEC share before taking into account the value of the Company's 22% investment in Katanga (worth 15p per CAMEC share), 4.81% investment in White Nile Ltd, 6.34% investment in Central African Gold plc, its extensive exploration portfolio, and its ownership of one of Africa's largest transport companies

- The Offer is made on an 'any or all' basis and is not conditional on a minimum number of Katanga shares being tendered. Management currently anticipates the Offer closing on 4 October 2007 subject to removal of Katanga's shareholder rights plan

- Upon completion, CAMEC will maintain its current listing on AIM and will apply for a listing on a Canadian Stock Exchange. The Company intends to move from AIM to the Official List of the UK Listing Authority within six months of completion of the transaction

- The management intends to meet with as many Katanga shareholders as possible in the coming weeks

Phil Edmonds, Chairman of CAMEC, said:

"We believe that the combination of CAMEC with Katanga will benefit both sets of shareholders and position the enlarged business to take an active role in any further consolidation of the sector in the DRC.

"Together with the shares we hold, the Offer has the support of shareholders representing approximately 54% of Katanga's shares. I encourage the remaining Katanga shareholders to accept our Offer and participate in the creation of a leading international copper and cobalt company."

(i) The preliminary assessment is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorised as mineral reserves, and there is no certainty that the preliminary assessment will be realised. Details concerning the basis for the preliminary assessment, including applicable qualifications and assumptions, are contained in the Behre Dolbear technical report dated August 23, 2007 and entitled "Technical Report on the Boss Mining Project, Kakanda District, Katanga Province, Democratic Republic of Congo". The report is included in the take-over bid circular and is available on the SEDAR web site at www.sedar.com.

Rationale for the Offer

CAMEC believes that a merger with Katanga is in the best interests of both companies and their respective shareholders as it will create a combined entity with:

- significantly greater business strength and critical mass;

- greater purchasing and pricing power in the international copper and cobalt markets;

- an ability to achieve a higher valuation rating than either CAMEC or Katanga alone;

- significant financial and operating synergies;

- a size appropriate for dual listing in the UK and Canada, resulting in greater liquidity for shareholders and enhancing the pro forma group's ability to access the capital markets;

- the capability to exploit any attractive value creating opportunities that may arise from further consolidation amongst the copper and cobalt producers in the DRC;

- reserves and resources demonstrated to international mining standards (National Instrument 43-101); and

- substantial and diverse exploration and development opportunities.

Conditions to the Offer

CAMEC will have the right to withdraw from, terminate or amend the Offer if certain conditions outlined in the Offer document are not satisfied or waived by CAMEC at or prior to the Expiry Time, as defined in the Offer document, including but not limited to due diligence and material adverse change clauses, and approval by CAMEC's shareholders. However, there is no minimum tender condition to the Offer.


CAMEC is an integrated exploration, mining and production company operating in Africa. Its primary focus is on mining and marketing of copper and cobalt.

CAMEC is in the process of completing the construction of its copper and cobalt processing facility at Luita, in the DRC. The first module of this facility was commissioned in March 2007. In the period from May to July 2007, it produced 2,300 tonnes of copper cathode and 260 tonnes of cobalt metal contained as concentrate. This facility will have the capacity to produce 100,000 tonnes annually of copper cathode and 12,000 tonnes annually of cobalt cathode by the end of December 2008.

Through CAMEC's 80% owned subsidiary, Boss Mining SPRL, CAMEC owns the copper cobalt concessions 467 and 469 in the Katanga province in southern DRC and 50% of Mukondo Mining Company SPRL, holder of the Mukundo mining concessions. The remaining 20% of Boss Mining SPRL is owned by Gecamines, the state-owned mining company in the DRC.

In addition:

- in Mozambique, CAMEC holds 21 coal licences covering in excess of 300,000 hectares in the prospective Zambezi Coal Basin;

- in South Africa, CAMEC owns (i) 51% of a company that controls significant fluorspar deposits and (ii) a 44.5% interest in Pfula Investments Ltd, which owns the rights to 51% and 40% respectively of the Inkosi and Imbasa Platinum Group Element projects located on the western limb of the Bushveld Complex in South Africa;

- in Mali, CAMEC is exploring for bauxite and other base metals; and

- in the DRC, CAMEC also holds two exploration licences in Moba, on Lake Tanganyika, close to the Tanzanian border, where initial exploration has defined both copper and gold anomalies.

In addition to its mining related activities, CAMEC has:

- acquired the SABOT group of companies, a transport and logistics operation with 450 Volvo trucks, trailers and tankers operating in central and southern Africa; and

- invested in D.E.C.A., a commodity trading and processing operation, primarily for maize, ground nuts and beans in central Mozambique;

About Katanga

Katanga is engaged in the acquisition and development of mineral properties and is currently focused on the refurbishment and rehabilitation of the Kamoto/Dima mining complex in the DRC. The first copper from this property is due to be shipped in December 2007, with full production to be reached in 2011 following completion of the four-phase rehabilitation of the brownfield site.
In February 2004, Katanga entered into a joint venture agreement with Gecamines, a state owned and operated mining enterprise of the DRC, to rehabilitate certain assets which include exploration and mining properties, the Kamoto concentrator, the Luilu metallurgical plant, the Kamoto underground mine and various oxide open pit resources in the Kolwezi district of the DRC.

Katanga is a Bermuda company. The Katanga Shares are listed on the TSX under the symbol "KAT".

For further information please visit www.camec-plc.com.

Important Notice:

As a result of restrictions under United States securities laws, Katanga shareholders that (i) are U.S. Persons (as such term is defined in Regulation S under the United States Securities Act of 1933, as amended (the "Securities Act")) or (ii) hold Katanga Shares on behalf of a U.S. Person (collectively "U.S. Shareholders") shall not be entitled to receive CAMEC Shares in connection with the Offer. Instead, CAMEC Shares that would have otherwise been distributed to U.S. Shareholders will be deposited in trust and sold in the market through an orderly sale and the net cash proceeds remitted to U.S. Shareholders.

This press release is not an offer of CAMEC Shares or any other securities for sale in the United States. The CAMEC Shares will not be registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration.

Contact Information

    Phil Edmonds / Andrew Groves
    0845 108 6060
    Website: www.camec-plc.com
    Seymour Pierce
    Jonathan Wright
    020 7107 8000
    Haywood Securities
    Edward Flood
    020 7031 8000
    Financial Dynamics
    Ben Brewerton
    020 7831 3113
    Barnes McInerney
    Ken Barnes
    (416) 367-5000 ext 226