An anonymous director reports
KATANGA MINING ANNOUNCES 2017 FOURTH QUARTER AND YEAR END FINANCIAL RESULTS
Katanga Mining Ltd. has released its financial results for the fourth quarter and 2017 fiscal year. Katanga's financial statements and management's discussion and analysis will be filed on SEDAR.
Three months ended Years ended
Dec 31, Sep 30, Dec 31, Dec 31, Dec 31,
2017 2017 2016 2017 2016
Financial
Total sales* $'000 7,696 5,875 3 25,292 (30,127)
- including repricing* $'000 265 (169) 3 99 (30,853)
Cost of sales $'000 (4,289) (3,031) - (31,839) -
Gross profit (loss) $'000 3,407 2,844 3 (6,547) (30,127)
Net loss attributable to shareholders $'000 (230,657) (115,362) (113,219)(573,496) (419,887)
Cash flows used in operating activities$'000 (71,844) (56,745) (7,089) (172,487) (161,080)
EBITDA** $'000 (187,587) (69,091) (64,468) (382,748) (238,745)
Mining
Waste mined tonnes 11,193,159 14,358,022 2,152,986 45,294,77 58,174,964
Ore mined tonnes433,169 - - 433,169 825
Average copper grade % 2.18 - - 2.18 2.67
Contained copper in ore mined tonnes9,459 - - 9,459 22
KTC
KITD material milled dmt 481,617 586,664 - 1,758,890 -
KITD copper contained in concentrate dmt 5,061 4,972 - 14,912 -
KOV Open pit ore milled tonnes163,211 - - 163,211 -
KOV Open pit ore grade % 4.05 - - 4.05 -
Luilu
WOL feed - KITD concentrate dmt 13,755 - - 13,755 -
WOL feed - open pit ore dmt 126,471 - - 126,471 -
Finished copper tonnes2,196 - - 2,196 -
Finished cobalt tonnes- - - - -
* Negative price and sales amounts are a result of quality discounts, adverse repricing and
marked-to- market ("M2M") adjustments
** Refer to item 23 Non-IFRS financial measures. Due to the suspension of production C1 cash
costs are not calculated for this period.
Commissioning and resumption of production
On September 11, 2015 the Company announced the decision to suspend the processing of copper and cobalt during the construction phases of the whole ore leach project ("WOL Project"). The suspension continued through 2017 with copper production resuming on December 11, 2017;
Commissioning of phase 1 of the WOL Project was completed in November 2017 and the first copper cathode was produced on December 11, 2017;
Phase 2 construction activities of the WOL Project have continued and are progressing according to the 2018 project execution plan. Full commissioning of the WOL Project is expected in Q4 2018; and
Mining operations continued during 2017 at the KOV open pit mine ("KOV Open Pit") and Mashamba East open pit mine, still focusing on waste stripping.
Review of 2017 Fourth Quarter Results
Financial
Profitability during Q4 2017, when compared to Q3 2017 and Q4 2016, was affected by:
-
Sales of 451 tonnes of finished copper cathode which represents a $3.3 million increase over Q3 2017 during which period there were no finished copper cathode sales;
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During Q4 2017, the Company sold 1,915 tonnes of copper contained in the Kamoto interim tailings dam ("KITD") oxide concentrate to Mutanda Mining SARL ("Mutanda"), which resulted in revenues of $4.5 million (Q3 2017 - $5.9 million); The production of KITD concentrates used for the ramp-up of operations in Q4 2017 will continue and the Company does not expect to make any further sales of concentrate in 2018;
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Cost of sales relating to the sale of copper cathode and copper concentrate was driven by metal stock movement amounting to $4.3 million in Q4 2017 (Q3 2017 - $3.0 million; Q4 2016 {A –} $nil);
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EBITDA for Q4 2017 was a loss of $187.6 million compared to a loss of $64.5 million for Q4 2016. Increased losses arose due to an increase in mine infrastructure, ramp-up and support care and maintenance costs, including higher diesel, mechanical spares and personnel costs; and
-
Net loss attributable to shareholders for Q4 2017 was $230.7 million compared to a loss of $113.2 million for Q4 2016. In addition to the items noted in EBITDA, the increased net loss in Q4 2017 resulted from higher depreciation, and interest.
Cash flow used in operating activities was $71.8 million in Q4 2017, and $7.1 million in Q4 2016.
Mining
-
Waste mined in Q4 2017 was 11,193,159 tonnes, which was 9,040,173 tonnes (419.9%) higher than Q4 2016. The increase was due to greater waste mining activities in 2017, carried out in preparation for the commissioning of the WOL Project, phase 1 of the core circuit which was completed in November 2017;
-
Following the commissioning of phase 1 of the WOL Project, the resumption of copper production and ore mining commenced in Q4 2017. Ore mined at the KOV Open Pit Mine ("KOV Open Pit") during Q4 2017 was 433,169 tonnes with an average copper grade of 2.18%, resulting in contained copper of 9,459 tonnes. In 2016, ore mined was 825 tonnes at KOV Open Pit and was related to incidental ore mined during waste mining; and
-
In Q4 2017, the Company did not commission any new items of fleet.
Processing
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KITD material milled for Q4 2017 at the Kamoto Concentrator ("KTC") was 481,617 tonnes, resulting in 5,061 tonnes of contained copper (oxides and sulphides). Copper contained in KITD oxide concentrate of 1,915 tonnes was sold to Mutanda in Q4 2017;
-
The total tonnes milled at KTC were 644,828 for Q4 2017, split between 481,617 tonnes of KITD material and 163,211 tonnes of KOV open pit ore;
-
Of the 163,211 tonnes of KOV open pit ore milled, 36,740 tonnes were used to commission the milling circuit and flotation circuit at KTC.;
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Material processed by Luilu Metallurgical Plant ("Luilu") after commissioning was 140,226 tonnes, of which 126,471 was KOV open pit ore tonnes and 13,755 was KITD oxide concentrate tonnes, which resulted in production of finished copper of 2,196 tonnes;
-
In Q4 2017, the Company re-commissioned the following assets at KTC:
B3 crusher for crushing capacity;
CM1, CM4, BM1 and BM3 for milling capacity; and
Flotation banks 801, 821, 802 and 803 for flotation capacity.
-
In Q4 2017, the Company commissioned:
A new pump station for the hydro-mining activities at KITD, to facilitate a production increase from 300tph to 500tph;
The core copper circuit of phase 1 WOL plant at Luilu;
A new metallurgical accounting system; and
Two new pipelines from KTC and Luilu for the deposit of tailings into the Mupine tailings storage facility.
During Q4 2017, the Company completed the following work on the WOL Project:
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Construction of the receiving thickener, core copper circuit counter current decantations, leach plant, high grade clarifier for the first phase of WOL Project and PLS and raffinate ponds for the first and second phase of WOL Project. The required modifications to the existing solvent extraction and electro- winning plants for first copper production in Q4 were also completed. Key services such as gland seal water, flocculant and lime plants were also installed and commissioned;
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The fibre communication network, SCADA (Supervisory Control and Data Acquisition software used for automated control of the plant), electrical and instrumentation equipment were installed and commissioned, allowing for plant start-up in November 2017;
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Related capital expenditures amounted to $53.1 million in Q4 2017;
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Concurrent with the construction of the WOL project plant and infrastructure, the current Life of Mine plan continues to be optimized to ensure the appropriate blend will be supplied to the WOL process in order to maximize copper and cobalt recovery and to minimize operating costs per unit; and
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Design work progressed during Q4 2017 on the acid plant (the "Acid Plant"), cobalt de-bottlenecking and cobalt dryer projects. The Acid Plant is a sulfuric acid and sulfur dioxide production plant expected to be constructed at the mine site owned by the Company's 75% subsidiary Kamoto Copper Company ("KCC"), which will improve the reliability of the supply of these reagents to the WOL Project processing circuit. The Acid Plant is designed to produce 1,900 tpd of sulfuric acid, 200 tpd of sulfur dioxide and 17MW of co-generated power. This will reduce KCC's reliance on imported volumes of reagents brought to the mine through various international borders.
Review of 2017 Full Year Results
Financial
Profitability during 2017, when compared to 2016, was affected by the following:
-
Sales of 451 tonnes of finished copper cathode which represented a $3.3 million increase over 2016 during which no copper cathode was produced. However, the Company has sales of negative $30.1 million in 2016 due to quality discounts;
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Sales of 2,746 tonnes of copper contained in KITD oxide concentrate and 5,862 tonnes from site clean up amounting to $22.3 million sold to Mutanda (2016 - $nil);
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Cost of sales relating to the sale of copper cathode and copper concentrate is driven by metal stock movement amounting to $31.8 million in 2017 (2016 {A –} $nil). The business rationale for selling the concentrate was to reduce working capital by liquidating inventory on hand that would otherwise not be processed in the short term to produce more profitable copper cathode. This led to gross loss on copper concentrate sold. The production of KITD concentrates used for the ramp-up of operations in Q4 2017 will continue and the Company does not expect to make any further sales of concentrate in 2018;
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EBITDA for the year ended December 31, 2017 was a loss of $382.7 million compared to a loss of $238.7 million for the year ended December 31, 2016. This was due to the increased costs associated with mining and general ramp-up, ahead of WOL Project commissioning; and
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Net loss attributable to shareholders for the year ended December 31, 2017 was $573.5 million compared to a loss of $419.9 million for the year ended December 31, 2016. In addition to the items noted in EBITDA, the increased net loss in the year ended 2017 was as a result of higher depreciation and interest expense.
Mining
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Waste mined in 2017 was 45,294,775 tonnes, or 454.1% higher than 2016 driven by operational requirement to secure sufficient ore availability for the commissioning of the WOL Project, for which the core circuit of phase 1 was completed in Q4 2017; and
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Following the commissioning of the core circuit of phase 1 of the WOL Project and resumption of copper production, ore mining commenced in Q4 2017. Ore mined at the KOV Open Pit Mine ("KOV Open Pit") during 2017 was 433,169 tonnes. The average copper grade of ore mined from KOV Open Pit was 2.18%, resulting in contained copper of 9,459 tonnes. In 2016, ore mined was 825 tonnes at KOV and is related to incidental ore mined during waste mining.
Processing
- The total tonnes of KITD material milled in 2017 was 1,758,890 tonnes with 14,912 tonnes of contained copper produced (in oxide & sulphide concentrates). Copper contained in KITD oxide concentrate of 2,746 tonnes and copper derived from site clean-up of 5,862 tonnes was sold to Mutanda in 2017;
During 2017, work completed on the WOL Project included:
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Construction of the acid storage tanks has been completed and progress continues on 'Structural, Mechanical, Platework and Piping ("SMPP") activities on the Receiving, Preleach, Leach and CCD trains. The SCADA (Supervisory Control and Data Acquisition software used for automated control of the plant), electrical and instrumentation equipment were installed and commissioned, allowing for plant start-up in November 2017; and
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Related capital expenditures amounted to $189.6 million in 2017, which principally related to the installation of the SMPP, electrical, control and instrumentation equipment.
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The total tonnes milled at KTC was 1,922,101 for 2017, split between 1,758,890 tonnes of KITD material and 163,211 tonnes of open pit ore;
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Of the 163,211 tonnes of open pit ore milled, 36,740 tonnes were used to commission the milling circuit and flotation circuit at KTC;
-
Material processed by Luilu after commissioning was 140,226 tonnes, of which 126,471 tonnes was open pit ore and 13,755 tonnes was KITD oxide concentrate tonnes, which resulted in finished copper of 2,196 tonnes;
-
In Q4 2017, the Company re-commissioned the following assets at KTC:
B3 crusher for crushing capacity;
CM1, CM4, BM1 and BM3 for milling capacity; and
Flotation banks 801, 821, 802 and 803 for flotation capacity.
-
In 2017, the Company commissioned:
A new pump station for the hydro-mining activities at KITD, to facilitate production increase from 300tph to 500tph;
The core copper circuit of phase 1 WOL plant at Luilu;
A new metallurgical accounting system;
Two new pipelines from KTC and Luilu for the deposition of tailings into the Mupine tailings storage facility;
Six CAT 793 haul trucks at the KOV open pit mine; and
One CAT 6015 excavator at the KOV open pit mine.
Outlook
During 2018:
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Open pit mining operations are expected to continue to feed ore to the run-of-mine stockpiles in accordance with the optimized ore blending strategy, and waste stripping in both KOV and Mashamba East open pits will continue;
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Hydraulic backfill and care and maintenance activities at KTO underground operations are expected to continue to ensure operational readiness for underground operations resuming in future years;
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Phase 2 construction activities on WOL Project to continue and are expected to progress according to the 2018 project execution plan;
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KTC including KITD, and Luilu are expected to ramp-up the operations to produce copper and cobalt in accordance with the ramp-up plan;
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Execution of the Acid Plant, cobalt dryers and cobalt de-bottlenecking projects are expected to continue to ensure the completion of the planned project schedules;
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The Company reiterates its 2018 production guidance of 150,000 tonnes and 11,000 tonnes of copper cathode and cobalt contained in hydroxide respectively; and
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Various continuous improvement initiatives relating to production enhancement and consumable inventory reduction are expected to be implemented to ensure the efficiency of operations.
Qualified Person
Tahir Usmani, PEng, APEGA, Chief Mine Planning Engineer of KCC, has reviewed and approved the scientific and technical disclosure in this news release. Mr. Usmani is a "qualified person" for the purposes of NI 43-101 - Standards of Disclosure for Mineral Projects.
About Katanga Mining Limited
Katanga Mining Limited 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.
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