Katanga Mining Limited
TSX VENTURE : KAT

Katanga Mining Limited

April 11, 2006 10:26 ET

Katanga Feasibility Study

TORONTO, ONTARIO--(CCNMatthews - April 11, 2006) - Katanga Mining Limited (TSX VENTURE:KAT) ("Katanga") Katanga today announced the completion of an independent feasibility study on the Kamoto Mine located near Kolwezi in the Democratic Republic of Congo. Rights to the Kamoto Mine are held by the Kamoto Joint Venture. Katanga owns 23.3% of the outstanding shares of Kinross Forrest Limited ("KFL") and holds an option to purchase the balance of the outstanding shares of KFL, the owner of a 75% interest in the Kamoto Joint Venture. The other 25% of the Kamoto Joint Venture is owned by La Generale des Carrieres et des Mines ("Gecamines").

The report encompasses the Joint Venture's first 20 years of production from proven and probable reserves as defined by National Instrument 43-101. The project's robust economics are based on a sustained average copper output of 122,300 tonnes per year and associated cobalt output of 6,400 tonnes per year. Using a copper price of US$1.10 per pound and a cobalt price of US$10.00 per pound the feasibility study shows the base case has a present value of US$649 million and an internal rate of return of 25.5% when financing all capital costs at an interest rate of 8.5% and applying a discount rate of 6.0% to the resulting net-cash flow.

The independent feasibility study, dated March 2006, was prepared for Katanga by HATCH & Associates and was based in part on a pre-feasibility study that was completed by HATCH in 2003. The feasibility study confirms the proposed approach of a phased re-development, and restoration of economically viable operations within a very short time with low capital costs relative to the restored production capacity. The re-establishment of operations at the Kamoto Mine is based on a phased approach over a four year period which was determined after HATCH had the opportunity to assess the condition of the plant, the capacity constraints of the facilities and the condition of the mines. The study demonstrates that the project achieves positive cash flow after year 3 and is capable of returning all development capital after its 7th year.

The following are the key parameters and assumptions by HATCH in the financial base case scenario:

- Evaluation Period - 20 years

- Phase 1 through 4 capital expenditures - US$426.7 million (+20% to -10%)

- Sustaining capital expenditures - US$231.3 million

- copper production - 2.16 million tonnes (4,758 million lbs.)

- cobalt production - 0.109 million tonnes (250 million lbs.)

- operating costs - US$0.74 per lb. of copper (0.21 per lb. of copper net of cobalt credits)

- Transport & Market - US$0.16 per lb. of copper (net of cobalt credits)

- Royalty and lease expenses - US$0.05 per lb. of copper (net of cobalt credits)

- Copper revenue - US$1.10 per lb.

- Cobalt revenue - US$10.00 per lb.

The more than 1,500 page HATCH report included the following observations:

The Kamoto Mine requires only limited work to restore production. A new trackless equipment fleet is to be purchased. The existing pumping infrastructure will be upgraded and new ventilation fans will be installed. Limited maintenance of the remaining infrastructure is required. Mining can begin almost immediately once the equipment arrives on site. Mining will be a combination of the historical room and pillar system and newly introduced longhole retreat stoping. The use of longhole retreat stoping will increase resource recovery to an estimated 80%, as well as improve operational flexibility. Backfill plants will be required to carry out this mining system.

The open pits will be mined to provide oxide ore. Production will begin in the Musonoie-T17 West pit and will continue there for approximately three years while the Mashamba East pit is being dewatered and prepared for mining. Open pit mining will also be carried out in both Mashamba West and Dikuluwe in later years. Open pit mining will be carried out by a contractor.

The Kamoto Concentrator is currently operating on a limited basis as ore becomes available. Initial work will consist of general maintenance to the plant and mills. Over time the concentrator will continue to be upgraded as production increases. Beginning in phase 3, and continuing to the beginning of phase 4, new floatation cells will be added to the circuit. The Luilu metallurgical plant will undergo refurbishment to restore it to a reliable operating state. The plant flow sheet will be retained, however new filter technology and two new roasters will be added to the plant during the different phases.

A substantial resource exists within the Kamoto Mine, and an early drilling program is planned to upgrade high-grade Resources in this area with the expectation that beneficial modifications to the current mine plan will follow with more information. The property also hosts several high quality exploration targets that will be evaluated after operations resume.

The Kamoto Joint Venture property's mineral Reserves and Resources as of March 28, 2006 are as follows:



Kamoto Mineral Reserve Estimate - Open Pits

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Classification Ore Copper Contained Cobalt Contained
Tonnes Grade Copper Grade Cobalt
(000s) % Tonnes % Tonnes
(000's) (000s)
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Proven Mineral
Reserves 37,168 3.23% 1,199 0.26% 96
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Probable Mineral
Reserves 10,430 3.08% 322 0.27% 28
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Proven and
Probable
Reserves 47,598 3.20% 1,521 0.26% 124
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Note: Mineral reserves are in addition to mineral resources. The
cut-off grade for copper is 2.16% for the T17 pit and 2.14% for
the DIMA pits and for cobalt is 0.47% for the T17 pit and the
DIMA pit.



Kamoto Mineral Reserve Estimate - Underground

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Classification Ore Copper Contained Cobalt Contained
Tonnes Grade Copper Grade Cobalt
(000s) % Tonnes % Tonnes
(000's) (000s)
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Proven Mineral
Reserves 37,466 3.10% 1,160 0.40% 148
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Probable Mineral
Reserves 8,101 3.05% 247 0.38% 31
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Proven and
Probable
Reserves 45,568 3.09% 1,407 0.39% 179
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Note: Mineral reserves are in addition to mineral resources. The
cut-off grade for copper is 2.52% and for cobalt is 0.51%.



Kamoto Mineral Resource Estimate - Open Pits

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Classification Ore Copper Contained Cobalt Contained
Tonnes Grade Copper Grade Cobalt
(000s) % Tonnes % Tonnes
(000's) (000s)
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Measured Mineral
Resources 33,564 311% 1,044 0.38% 127
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Indicated Mineral
Resources 12,925 3.18% 412 0.35% 45
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Total Measured
and Indicated
Mineral Resources 46,489 3.13% 1,456 0.37% 172
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Inferred Mineral
Resources 17,493 3.41% 596 0.32% 56
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Note: Mineral resources are exclusive of mineral reserves. The
cut-off grade for copper is 1.83% for the T17 pit and 1.87% for
the DIMA pits and for cobalt is 0.47% for the T17 pit and the
DIMA pit.



Kamoto Mineral Resource Estimate - Underground

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Classification Ore Copper Contained Cobalt Contained
Tonnes Grade Copper Grade Cobalt
(000s) % Tonnes % Tonnes
(000's) (000s)
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Measured Mineral
Resources -
Available 19,355 3.80% 736 0.52% 101
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Indicated Mineral
Resources -
Available 5,593 4.33% 242 0.35% 19
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Sub Total Measured
and Indicated
Mineral Resources
- Available 24,948 3.92% 978 0.48% 121
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Inferred Mineral
Resources -
Available 12,202 4.95% 603 0.16% 20
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Measured Mineral
Resources - In
Pillars 206 4.22% 9 0.36% 1
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Indicated Mineral
Resources - In
Pillars 961 4.81% 46 0.23% 2
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Sub Total Measured
and Indicated
Mineral Resources
- In Pillars 1,167 4.71% 55 0.25% 3
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Inferred Mineral
Resources - In
Pillars 2,577 4.97% 128 0.16% 4
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Measured Mineral
Resources -
Total 19,561 3.81% 745 0.52% 102
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Indicated Minerals
Resources - Total 6,555 4.40% 288 0.33% 22
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Total Measured
and Indicated
Mineral Resources 26,116 3.96% 1,033 0.47% 124
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Inferred Mineral
Resources - Total 14,778 4.95% 732 0.16% 24
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Note: Mineral resources are exclusive of mineral reserves. The
cut-off grade for copper is 2.14% and for cobalt is 0.51%.


Based on past mining practices and current economic conditions, the pillar resource is deemed to be economically extractable toward the end of life of mine, subject to a full geotechnical investigation which will be addressed in the final design phase, after which any possible changes to the pillar resource stated will be evaluated and publicly disclosed if deemed material.

The feasibility study utilized the following total recoveries:



Phase 1 Phase 2
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Copper Cobalt Copper Cobalt
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Sulphide Ore 81.2% 44.2% 81.6% 43.2%
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Oxide Ore 68.3% 31.1% 70.3% 29.9%
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Dolomitic Ore 63.4% 12.3% 63.1% 11.8%
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The project calls for two distinct phases of capital infusion. The first phase relates to the four-year build to a sustainable production capacity. The second phase consists of ongoing capital replacement costs and lasts through year 16.

The capital costs (in thousands of USD) for the initial four-year production build to a sustainable production capacity phase are summarized as follows:



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Area Total Phase 1 Phase 2 Phase 3 Phase 4
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Kamoto
Mine 80,377 31,683 20,158 16,338 12,158
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Open
Pits $14,611 $13,161 $1,150 $150 $150
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Kamoto
Concen-
trator $55,216 $23,492 $9,835 $14,703 $7,185
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Luilu $150,098 $38,772 $44,322 $50,368 $16,635
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Infrast-
ructure $23,634 $18,018 $1,662 $3,201 $754
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Indirect
Costs $54,318 $30,928 $8,421 $7,334 $7,635
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Contin-
gency $48,572 $19,504 $10,972 $12,486 $5,611
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Total USD426,786 USD175,558 USD96,522 USD104,579 USD50,128
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Replacement and ongoing capital requirements for the life-of-mine analysis period (in thousands of USD) are as follows:



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Area Total
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Underground Mine USD103,017
Concentrator $30,486
Hydro-Metallurgical $79,310
General & Administration $2,450
Dewatering $16,000
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Total USD231,263
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Over the analyzed 20- year period site operating costs are as
follows:

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Phase 1 Phase 2 Phase 3 Phase 4 Average
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Tonnes (t) Copper 23,592 66,510 114,590 1,953,404
Tonnes (t) Cobalt 890 2,757 6,725 102,964
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Underground Mining 29,106 37,542 55,362 716,122
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Open Pit Mining 20,747 70,591 73,734 841,872
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Kamoto DIMA
Concentrator 8,415 13,696 22,752 425,791
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Luilu Plant 22,762 30,524 50,801 836,989
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General &
Administration 19,596 15,579 17,392 202,528
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Total ('000s USD) 100,626 167,931 220,041 3,023,302
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Cost per lb.
(USD/lb. Cu) 1.91 1.15 0.87 0.70 0.74
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Cost per lb. Cu
(with Co credit) 1.53 0.73 0.28 0.17 0.21
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Cost per tonne Cu 4,201 2,525 1,920 1,548 1,627
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Cost per tonne Cu
(with Co Credit) 3,382 1,611 626 386 469
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Note: Columns may not add due to rounding



Over the analyzed 20-year period, total production costs are as
follows:

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Total ('000s
USD) USD/t ore USD/lb. Cu USD/t Cu
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Underground Mining 838,132 9.36 0.18 388
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Open Pit Mining 1,006,945 11.24 0.21 467
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Kamoto DIMA
Concentrator 470,654 5.26 0.10 218
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Luilu Plant 941,075 10.51 0.20 436
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General &
Administration 255,095 2.85 0.05 118
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Site Operating
Cost Sub Total 3,511,900 39.21 0.74 1,627
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Cobalt Credit (2,498,660) (0.53) (1,158)
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Site Operating
Cost Total After
Cobalt Credit 0.21 469
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Transport and
Marketing Expenses 769,002 0.16 356
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Royalty and Lease
Obligations 250,234 0.05 116
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Capital Costs 658,049 0.14 305
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Total Production
Costs 2,690,525 0.57 1,247
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Note: Columns may not add due to rounding


Capital and operating cost estimates were developed by the individual consultancy companies with full responsibility for their respective areas and collated by HATCH. The work of each company has not been verified by the other companies. The feasibility study assumes an income tax rate of 30% of taxable profit, a royalty of 2% (revenue less selling expenses) payable to the Democratic Republic of Congo and a royalty of 2% of sales (revenue less selling expenses and debt redemption) during the first three years and 1.5% thereafter payable to Gecamines.

The HATCH feasibility study contemplates the design and implementation of sustainable social development programs and initiatives in the region of the Kamoto Mine in an effort to increase the social services programs and to specifically address areas of general education, advanced technical training, general medical services, agricultural educational programs, economic opportunities and micro-enterprises. The programs are intended to assist the local and regional economic rehabilitation resulting from the project's significant tax contribution and the many tertiary economic opportunities that will develop. Hatch estimated that during the course of the project, the communities and the DRC will recognize approximately USD1,487 million of economic benefits.

All mineral rights held by the Kamoto Joint Venture are registered in the name of Kamoto Copper Company. The site facilities are held by the Joint Venture pursuant to a lease agreement with Gecamines. Under the lease agreement, Gecamines will retain all liabilities including environmental liability from all prior activities that occurred on the site prior to the Kamoto Joint Venture operations.

Arthur H. Ditto, President and Chief Executive Officer of Katanga commented: "The Hatch study illustrates the unique and special character of the Kamoto project's large reserves and resource inventory, and how they will support a low cost financially robust enterprise for many years into the future." Mr. Ditto also noted that Kamoto has a long history of converting its resources to reserves and the early development-drilling program is an important part of the program to achieve a sustained 150,000 tonnes per year of refined copper output. "The modest lead time to retrofit Kamoto and have it rejoin the world's important copper-cobalt producers is another unique aspect of the venture," he said. "I look forward to quickly getting the project underway and to the major benefit it will bring to the DRC, Province of Katanga, and our shareholders." he added.

The feasibility study comprises several components prepared by HATCH (metallurgical and plant engineering studies including mechanical and electrical engineering, surface infrastructure and financial modelling studies), McIntosh RSV LLC ("RSV"), in association with Caracle Creek International Consulting Inc. ("CCIC") (mineral reserves and resources and mine planning), and SRK Consulting Engineers and Scientists (environmental, tailings and groundwater studies).

Katanga intends to file a National Instrument 43-101 Independent Technical Report regarding the feasibility study shortly. Dr. Scott Jobin Bevans, P.Geo. of CCIC and Mr. Malcolm Paul Lotriet, Pr.Eng, FSASIMM, of RSV are the independent "Qualified Persons", within the meaning of National Instrument 43-101, who prepared the mineral reserve and resource estimate and have reviewed and approved the content of this press release. Mr. Christian Heili, Pr.Eng and FSAIMM of HATCH, an independent "Qualified Person", within the meaning of National Instrument 43-101, was responsible for metallurgical and plant engineering as well as financial modelling and the economic evaluation and has reviewed and approved the content of this press release.

The executive summary of the HATCH feasibility study is posted on Katanga's web site at www.katangamining.com.

Cautionary Statements

Completion of the reverse takeover transaction described in this press release is subject to a number of conditions, including Exchange acceptance and disinterested shareholder approval. The reverse takeover transaction can not close until the required shareholder approval is obtained. There can be no assurances that the reverse takeover transaction will be completed as proposed or at all. Investors are cautioned that, except as disclosed in the management information circular to be prepared in connection with the reverse takeover transaction, any information released or received with respect to the reverse takeover transaction may not be accurate or complete and should not be relied upon. Trading in the securities of Katanga Mining Limited should be considered highly speculative. The TSX Venture Exchange has in no way passed upon the merits of the proposed reverse takeover transaction and has neither approved nor disapproved the contents of this press release.

This news 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. 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 to be materially different from those expressed or implied by such forward-looking statements., including but not limited to risks discussed in or referred to in the current annual Management's Discussion and Analysis 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. Katanga does not undertakes to update any forward-looking statements that are incorporated by reference herein, except in accordance with applicable securities laws.

Contact Information

  • Katanga Mining Limited
    Arthur H. Ditto
    President & Chief Executive Officer
    Office: (416) 369-4340
    Mobile: (416) 456-3308
    or
    Katanga Mining Limited
    Anu Dhir
    VP Corp. Development
    Office: (416) 369-4340
    Mobile: (416) 843-0401
    Visit our website at: www.katangamining.com