Bill must be more confident than Katanga Mining, see article below. It gives everyone an idea how difficult operating conditions Anvil and other DRC miners are under.
Katanga turns to Glencore again for bailout
By: Liezel Hill
28th April 2009
TORONTO Source:(miningweekly.com) - TSX-listed Katanga Mining will receive a $50-million bridge loan from shareholder Glencore Finance,to address "critical" solvency concerns, the company reported on Tuesday.
Katanga shares slid 9,23% on Tuesday, to 29,5 Canadian cents apiece by 15:40 in Toronto.
The nonconvertible bridge loan will be due on June 30 this year, and Glencore has also committed to subscribe for the necessary number of shares in a planned rights offering to ensure that Katanga raises the full $250-million that it needs to fund ongoing project development.
The company needs cash "urgently" to fund ongoing operations, and the bridge loan will address the immediate solvency risk, while the rights offering will be used to repay the loan, and fund development and production ramp up, at the company's Democratic Republic of Congo operations.
Katanga is consolidating, rehabilitating and expanding the neighbouring Kamoto and KOV operations in the DRC, after merging with rival Nikanor in 2008, but investors have been wary of the stock because of uncertainty generated by the mining contract review in the African nation, and, most recently, cash flow has taken a big knock because of slumping metals prices.
The company, which had already scaled back its operations to cushion the effects of low metals prices, cautioned late last year that it required additional funding "on an urgent basis" to stay afloat.
Shareholder Glencore agreed late in December to underwrite a convertible $100-million loan facility, as well as an amendment to an existing $165,3-million loan.
However, even after shareholders approved a massive increase in the firm's authorised share capital from 300-million to 5-billion shares, to facilitate the convertible loan, Katanga said in January it would still need another $250-million.
Although third parties were given an opportunity to buy into the convertible loan, only two other parties - RP Explorer Master Fund and Lora Enterprises - opted to acquire a portion.
Katanga said on Tuesday it has been trying since November to obtain funding commitments from "new, unrelated investors" and approached a total of 12 potential investors.
Glencore was also approached to provide interim financing and, after no other offers to provide the necessary financing were received, Glencore agreed to help the company raise the $250-million.
"A broad market canvass conducted by Katanga's financial advisor over a period of six months has failed to identify any other potential investors that are prepared to make a firm proposal to provide financing on terms that are as certain as those provided by Glencore," the company said.
Meanwhile, Glencore has also informed Katanga that it is in talks with a third party to form a joint venture, to hold Glencore's shares in Katanga.
Glencore would likely contribute all its Katanga shares into the joint venture, in which it would sell 50% to the third party for cash.
The unnamed potential partner does not currently own any Katanga shares, the firm said.
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