Katanga Announces Settlement of Ventora and Africa Horizons Dispute

ZUG, Switzerland, June 15, 2018 /CNW/ - Katanga Mining Limited (TSX: KAT) ("Katanga" or the "Company") today provides an update on its announcement of April 27, 2018 in respect of freezing orders filed against Katanga's 75% subsidiary, Kamoto Copper Company ("KCC"), by Ventora Development Sasu ("Ventora"), a company affiliated with Mr. Dan Gertler.

Katanga, in conjunction with Glencore, has carefully considered its various legal and commercial options in connection with its dispute with Ventora and its obligations towards Africa Horizons Investments Limited ("AHIL"), a company also affiliated with Mr. Dan Gertler, as well as to its shareholders, customers and other shared stakeholders including the communities in which they operate in the Democratic Republic of the Congo ("DRC").

Based on its review, Katanga has determined that in the circumstances the only viable option, for its sole operation, KCC,  to avoid the material risk of seizure of its assets under DRC court orders is for KCC to pay the relevant royalties as and when they become due to Ventora in non-US dollars, without involving US persons, in order to discharge its obligations under the terms of the pre-existing contracts with AHIL previously disclosed by Katanga. KCC has therefore entered into a settlement deed with AHIL and Ventora pursuant to which the parties have agreed to withdraw all pending and threatened litigation between them. KCC has also acknowledged the assignment by AHIL to Ventora of the royalties initially owed by KCC to AHIL.

Katanga believes that payment in non-US dollars of royalties to Ventora without the involvement of US persons would appropriately address all applicable sanctions obligations

Katanga is a substantial investor and partner in the DRC and is committed to sustainable mining, creating employment and supporting local businesses, thereby providing substantial revenues to local and national government and making voluntary contributions to improve living standards in the communities in which it operates. 

Katanga is a significant producer of copper and cobalt, a metal that is of critical importance for batteries for electric vehicles and portable electronics as well as essential technology, defense and industrial applications. Katanga's operations are a significant source of industrial cobalt and guarantees the provenance of its production material and the exclusion of child labour or conflict minerals from the supply chain.

Background

On April 27, 2018, Ventora served in the DRC a freezing order against KCC for approximately US$2.28 billion. Ventora alleged that KCC had breached an agreement between KCC, La Générale des Carrières et des Mines ("Gécamines") and AHIL pursuant to which it alleged KCC was required to make royalty payments to Ventora. Ventora asserted that if its claim was upheld it would be entitled to damages of approximately US$2.28 billion, which it alleged was the value of the future royalties due to it under the agreement.

On April 28, 2018, Ventora obtained from the Kolwezi Commercial Court an injunction to pay against KCC in the amount of US$2.86 billion (an increase of US$572 million for alleged legal fees), which, if the injunction had become final, would have potentially enabled Ventora to permanently seize assets at the KCC mine up to the amounts of the injunction. These assets seizures would have severely disrupted the mine and enabled Ventora to seize all productive assets at the mines, including mining titles.

Further information on agreements with Ventora and AHIL

In December 2017, the United States government designated Mr. Dan Gertler and affiliated companies, including AHIL, as specially designated nationals ("SDNs"), thereby imposing blocking sanctions on them and companies owned 50% or more by them.

As previously disclosed, KCC has an obligation under the joint-venture agreement between Katanga and Gécamines to pay royalties quarterly at a rate of 2.5% of "net sales" from the KCC mine, subject to certain deductions. When the Gertler-affiliated entities acquired these rights from Gécamines in January 2015, KCC became a party to an agreement with Gécamines and AHIL, which was concluded prior to the designation of Mr. Gertler and AHIL as SDNs.

Katanga estimates that the royalties for 2018 will be approximately €10 million per quarter and then for 2019 approximately €16.5 million per quarter. KCC made a pre-payment of royalties to AHIL in 2015, and the current royalties payable are offset against the remaining balance outstanding under such pre-payment.  It is expected that the next royalty payment from KCC to Ventora will be in 2019.

As explained above, AHIL has assigned its right to receive royalties to Ventora such that Ventora will be the recipient of royalties at KCC with immediate effect.

About Katanga Mining Limited
Katanga Mining Ltd. operates a major mine complex in the Democratic Republic of Congo producing refined copper and cobalt. The Company has the potential to become Africa's largest copper producer and the world's largest cobalt producer. Katanga is listed on the Toronto Stock Exchange under the symbol KAT.

Forward Looking Statements
This press release may contain forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or describes a "goal", or variation 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 in this press release include: the expected treatment by the U.S. Government of any future royalty payments to Ventora or AHIL by KCC; the ultimate settlement of the disputes between Katanga, AHIL and Ventora and withdrawal of same from the relevant courts; Katanga's expectation that it will make ongoing payments of relevant royalties in the manner described herein; Katanga's belief that payment in non-U.S. dollars of royalties to Ventora without the involvement of U.S. persons would appropriately address all applicable sanctions obligations and is necessary to avoid the material risk of seizure of its mining assets under DRC court orders; Katanga's estimate that the royalties for 2018 will be approximately €10 million per quarter and then for 2019 approximately €16.5 million per quarter; and Katanga's expectation that the next royalty payment from KCC to Ventora will be in 2019.

All forward-looking statements reflect the Company's beliefs and assumptions based on information available at the time the statements were made. Actual results or events may differ from those predicted in these forward-looking statements. All of the Company's forward-looking statements are qualified by the assumptions that are stated or inherent in such forward-looking statements, including the assumptions listed below. Although the Company believes that these assumptions are reasonable, this list is not exhaustive of factors that may affect any of the forward-looking statements. The key assumptions that have been made in connection with the forward-looking statements include the    following: the U.S. government taking no action with respect to the payment of relevant royalties by KCC to companies affiliated with Dan Gertler; legal issues surrounding the purported assignment of certain rights under an agreement between KCC, Gécamines and AHIL to Ventora,; Katanga's current estimates of "net sales" will prove to be accurate; and the outcome in DRC courts of these and related matters.

Forward-looking statements involve known and unknown risks, future events, conditions, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from any future results, prediction, projection, forecast, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others: the treatment of ongoing royalty payments by KCC to companies affiliated with Dan Gertler being uncertain; the difficulty of predicting "net sales" and future cash flows; and regulatory and judicial risks. Although Katanga has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking 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.

The Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events, or otherwise, except in accordance with applicable securities laws.

SOURCE Katanga Mining Ltd.