Katanga Mining Limited
TSX VENTURE : KAT

Katanga Mining Limited

March 21, 2006 17:46 ET

Katanga/KFL Agreement Amended

TORONTO, ONTARIO--(CCNMatthews - March 21, 2006) - Katanga Mining Limited (TSX VENTURE:KAT) ("Katanga" "Company") announced today that the agreement pursuant to which the Company had an option to acquire all of the issued and outstanding shares in the capital of Kinross Forrest Limited ("KFL") has been amended. As a result of the amendment, Katanga has agreed to acquire all of the outstanding shares of KFL not currently owned by Katanga in exchange for an aggregate of 35,001,500 common shares of the Company. Katanga's agreement to purchase all of the outstanding shares of KFL is subject to certain conditions, including: (i) receipt of all requisite regulatory approvals, including the approval of the TSX Venture Exchange; (ii) receipt of approval to the purchase transaction from the shareholders of Katanga; and (iii) receipt of a feasibility study demonstrating that the net present value of KFL's interest in the Kamoto Joint Venture is not less than US$570 million (using a discount rate to net cash flow of KFL's interest in the Kamoto Joint Venture of 10% per annum and based on a price of US$1.10 per pound of copper and a price of US$10.00 per pound of cobalt).

The acquisition of the remaining shares of KFL not currently owned by Katanga will be considered to be a reverse takeover transaction pursuant to Policy 5.2 of the TSX Venture Exchange (the "Exchange") Corporate Finance Manual as it will result in a shareholder owning in excess of 20% of the issued and outstanding shares of Katanga, namely, George Forrest International Afrique sprl. The Exchange will impose a condition to completion of the reverse takeover transaction/acquisition that Katanga must demonstrate its ability to meet the minimum listing requirements of the Exchange, which require evidence of financial means to complete 18 months worth of expenditures as contemplated in the first phase of operations as set forth in the feasibility study to be completed by Katanga. It is currently contemplated that the Exchange will impose a condition that Katanga raise a minimum of CDN$75,000,000 in equity financing prior to or concurrent with its completion of the acquisition.

In December, 2005, Katanga purchased a 23.33% interest in KFL from Kinross Gold Corporation who retains an 11.67% interest in KFL. The other shareholders of KFL are Tain Holdings Limited, George Forrest International Afrique sprl. and Robert M. Buchan. Tain Holdings Limited is a company that holds its interest for the benefit of Arthur H. Ditto, the President, Chief Executive Officer and a director of Katanga. George Forrest International Afrique sprl is a company that is wholly-owned by George Forrest, a director of Katanga. Robert M. Buchan is the non-executive chairman and director of Katanga. Mr. Ditto currently owns 980,000 common shares of Katanga, Mr. Forrest currently owns 1.0 million common shares of Katanga and Mr. Buchan currently owns 500,000 common shares of Katanga. Messrs. Ditto, Forrest and Buchan collectively own 10.99 % of the issued and outstanding shares of Katanga. For the purposes of Ontario Securities Commission Rule 61-501, the completion of the acquisition is considered to be a "related party transaction". Katanga will therefore seek the approval of a majority of the disinterested shareholders. The special shareholders' meeting will be held on May 11, 2006.

After completion of the acquisition, Tain Holdings Limited and Mr. Ditto will own 6,505,000 common shares of Katanga, George Forrest and George Forrest International Afrique sprl will own 18,800,000 common shares of Katanga and Mr. Buchan will own 6,425,000 common shares of Katanga. After the issuance of the 35,001,500 million shares pursuant to the exercise of the option, Katanga will have 55,214,976 shares outstanding on a non-diluted basis.

KFL is the owner of a 75% interest in the Kamoto Joint Venture, the remaining 25% being owned by La Generale des Carrieres et des Mines ("Gecamines"). The Kamoto Joint Venture was formed in February, 2004 by KFL and Gecamines, the state owned and operating mining enterprise of the Democratic Republic of Congo (the "DRC"). The Kamoto Joint Venture, through Kamoto Copper Company SARL ("KCC") a DRC company incorporated and organized by KFL and Gecamines, leases from Gecamines, the Kamoto concentrator, the Luilu metallurgical plant, the Kamoto underground mine and various oxide open pit resources, in the Kolwezi area of the DRC. Pursuant to the Mining Code of the DRC, KCC is the recorded leaseholder of the real properties and the minerals related thereto. KCC is owned 75% by KFL and 25% by Gecamines. KCC has a six person board, four members of which are nominees of KFL. It is anticipated that KCC will receive cash flow from Kamoto Joint Venture operations and as a result, from net cash flow, will pay dividends to its shareholders, KFL and Gecamines. Under the Kamoto Joint Venture, KFL must provide all funding to conduct operations and it is anticipated that KFL will receive repayment of the capital and interest on such loans on a preferential basis.

Original mining activity in the Kolwezi area was performed by Union Miniere du Haut Katanga and then following independence of the DRC, by Gecamines. At its peak, in 1986, Gecamines produced 476,000 tonnes of copper and 14,500 tonnes of cobalt, 63,900 tonnes of zinc, 34.3 tons of silver plus cadmium and other minor metals, with the majority of production from the Kolwezi area. In the Kolwezi area, combined average production grade from the underground and open pit mines feed to the concentrators was slightly above 4% copper and 0.35% cobalt. By 1993, production had fallen to 45,900 tonnes of copper, 2,920 tonnes of cobalt, 4,100 tonnes of zinc and no reported silver. Currently there is virtually no production.

The Kamoto Joint Venture received the approval of the Conseil des Ministres du Government de Transition of the DRC (the Congolese Government) on July 15, 2005. The Kamoto Joint Venture requires that a feasibility study be delivered by KFL to Gecamines within eight months after the Kamoto Joint Venture has received all Government approvals. The feasibility study will be deemed to be positive if it achieves a discounted rate of return on total capital invested to achieve a minimum of 150,000 tonnes of sulfide ore processed each month of not less than 20%. Please refer back to our press release dated August 2, 2005 filed on www.sedar.com

Arthur Ditto, President and CEO of Katanga noted "because Kamoto is an excellent project, and because there is a robust market for equity and project financing, the KFL shareholders felt comfortable amending the formula-based option agreement to a fixed share-exchange transaction. Removing uncertainty about the number of shares to be issued for KFL will facilitate financing Katanga." Mr. Ditto added "once the Kamoto operation is underway it will be an important tax payer to the DRC's economy employing several thousand local people and resulting in significant secondary social and economic benefits to the Kolwezi area, and the Katanga region. Ongoing financial contributions to social development initiatives that are identified by Katanga jointly with leaders of the local community will be integrated into the business plan for the operation with a focus on self-sustainability."

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 or Mobile: (416) 456-3308
    (416) 369-4347 (FAX)
    or
    Katanga Mining Limited
    Anu Dhir
    VP Corp. Development
    Office: (416) 369-4340 or Mobile: (416) 843-0401
    (416) 369-4347 (FAX)
    Visit our website at: www.katangamining.com