https://hotcopper.com.au/threads/congo-cobalt-in-trouble.4149193/
“I've held a position in Katanga and Glencore for some time and have been following this story and know a bit about the financial structure of these organizations as they relate to DRC operations, and it is a bit complex to say the least ! In a nutshell, Glencore owns 86% of Katanga which in turn owns 75% of Kamoto Copper Company (KCC), the actual DRC mining entity. The remaining 14% of Katanga trades on TSX and the remaining 25% of KCC is owned by the DRC government controlled mining group Gecamines'.
The current issue coming to DRC court on May 8th is that KCC is currently not in compliance with DRC rules around the equity ratio of its balance sheet, mainly because Glencore has been financing the mine development costs via forward purchases of product and notes, most at 10% interest rate. Glencore/Katanga has stated that this issue can be resolved through some financial machinations (ie. debt for equity swap) and if this is done and confirmed by their auditor prior to May 8th there basically is no legal merit for a court case and the issue is moot. Glencore/Katanga have stated that they have approached Gecamines' on a number of occasions to attempt to resolve the issue but Gecamines' has refused to participate in discussions.
So, in my view, it is highly probable that the issue is resolved financially by Glencore/Katanga/KCC prior to May 8th, not without some cost to Glencore/Katanga for a compromised financial arrangement that somehow satisfies the DRC entity, but also not a complete disaster. Remains to be seen however just how forthright DRC courts and government are in fulfilling their own legal obligations around the resolution.”
NZC Price at posting:
32.0¢ Sentiment: Buy Disclosure: Held
