Katanga Mining : Announces 2019 First Quarter Financial Results
Financial performance highlights for the three months ended
Three months ended
Mining, processing and other costs (net of changes in metal
Royalties and transportation costs
Depreciation and amortization
Write-offs/loss on disposal of property, plant and equipment
Net finance costs
Income tax expense
Net loss and comprehensive loss
Attributable to shareholders of the company
Basic and diluted loss per common share
Refer to item 2 under 'Restatement of Historical Financial Statements filed in 2017 and OSC Settlement' in the Company's MD&A.
The aggregation of sales, cost of sales (less depreciation), general and administrative expenses, loss on disposal and write-offs of property, plant and equipment and foreign exchange gains and losses are included within adjusted EBITDA (Refer to item 22 'Non-IFRS measures' of the Company's MD&A).
Refer to item 22 'Non-IFRS measures' of the Company's MD&A.
Three months ended
Including net provisional pricing adjustment
Copper cathode sold
Cobalt contained in hydroxide sold
Copper contained in concentrate sold
LME average copper price
Realized copper price*
MB average cobalt price
* Realized copper prices are based on gross copper revenue (above) after deducting realization charges, royalties and other selling expenses.
The movement in revenue is due to the following price and volume factors:
- Copper revenue increased to
$355.0 millionin Q1 2019 from $146.5 millionin Q1 2018. The increase in copper revenue is due to the increase in copper production and sales driven by the completion of phase one of the WOL Project.
- Included in sales is a net provisional pricing adjustment resulting from movements in the commodity price between the date of sale and the final pricing based on average prices for a specified period thereafter. At each reporting date, provisionally priced sales that have not been finalized retain an exposure to future changes in prices and are marked-to-market based on
London Metal Exchange("LME") and Metal Bulletin ("MB") forward prices. These adjustments were recorded in sales in the statement of loss and comprehensive loss and within receivables on the statement of financial position.
The movement in cost of sales, depreciation, royalties and transportation costs is due to:
Three months ended
Open pit mining costs
Underground mining costs
KTC processing costs
Luilu refinery costs
Change in metal stock
Mine infrastructure and support costs
Expense on issue of capital spares to production
Royalties and transportation costs
Total cost of sales
Review of 2019 First Quarter Expenses
- Gross loss increased to
$92.5 millionin Q1 2019 from $31.6 millionin Q1 2018. The increase in gross loss is driven by an increase in net realizable value adjustment on ore in stockpile inventory, provision on obsolete consumable inventories, higher reagent costs at Luilu and an increase in total oxide feed received from KTC in line with the optimized mine plan, offset by an increase in copper revenue due to an increase in copper production;
- Open pit mining costs increased to
$29.7 millionin Q1 2019 from $15.0 millionin Q1 2018. The increase in open pit mining costs is due to an increase in total material mined;
- KTC processing costs increased to
$27.4 millionin Q1 2019 from $14.3 millionin Q1 2018. KTC processing and operational costs increased due to an increase in total material milled and processed;
- Luilu refinery costs increased to
$150.2 millionin Q1 2019 from $39.1 millionin Q1 2018, due to increased reagent costs and an increase in total oxide feed from KTC, in line with the optimized mine plan;
- Mine infrastructure and support costs increased to
$113.0 millionin Q1 2019 from $51.7 millionin Q1 2018. The majority of this increase is the inventory obsolescence provision of $46.9 million; and
- Royalties and transportation costs have increased to
$56.3 millionin Q1 2019 from $21.8 millionin Q1 2018, due to higher copper revenues and sales tonnes.
Three months ended
Cash flow generated (used) in:
Operating activities before changes in working capital
Changes in working capital
Increase (decrease) in cash
Cash, beginning of period
Effect of exchange rate changes on cash held in foreign currencies
Cash, end of period
Review of 2019 First Quarter Cash Flows
- Cash flows generated in operating activities before changes in working capital decreased to
$27.0 millionin Q1 2019 from $35.9 millioncash flow in Q1 2018. The decrease in cash flows generated in operating activities before changes in working capital is driven by a decrease in net income (excluding non-cash item addbacks) due to increased operating costs and delayed revenue due to the temporary suspension of cobalt sales;
- Changes in working capital outflows increased to
$27.3 millionin Q1 2019 from an outflow of $0.4 millionQ1 2018. The increase in working capital outflows is primarily driven by the decrease in accounts payable, offset by an increase in accounts receivable due to higher sales volumes;
- Cash outflows from investing activities increased to
$170.9 millionin Q1 2019 from $82.6 millionin Q1 2018. The increase in cash outflows relates to planned spending on expansionary and sustaining capital expenditures; and
- Cash inflows from financing activities increased to
$260.0 millionin Q1 2019 from $29.7 millionin Q1 2018. The increase in cash inflows from financing activities relates to drawdowns under the Bank Loan Facility (please see Item 9 under 'Liquidity and Capital Resources' in the Company's MD&A for further details).
Besides the previously announced subsequent events (see previous press releases of the Company available on www.sedar.com), the following events occurred since the quarter ended
Update on Loan Facilities
In addition, Katanga received a proposal from Glencore which is designed to address the Company's overall indebtedness to Glencore under the Loan Facilities. In response to the Proposal, a special committee of independent directors has been formed and such committee has retained advisors to facilitate ongoing discussions with Glencore.
Glencore and the Company have taken steps to further formalize Glencore's ongoing support and to facilitate consideration of the Proposal or alternatives for dealing with repayment obligations under the Loan Facilities. In furtherance of this, Glencore has agreed to provide the required financial support to the Company to enable the Company to pay its debts as when they become due and payable in the 12 month period from the date of approval of the unaudited interim condensed consolidated financial statements for the three months ended
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.
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: there being no significant disruptions affecting the operations of the Company whether due to legal disputes, judicial action, labour disruptions, supply disruptions, power disruptions, rollout of new equipment, damage to equipment or otherwise; permitting, development, operations, expansion and acquisitions at KCC being consistent with the Company's current expectations; continued recognition of the Company's mining concessions and other assets, rights, titles and interests in the DRC; political and legal developments in the DRC being consistent with its current expectations; the continued provision or procurement of additional funding from Glencore for operations, the completion of the
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. 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.
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