not just us it seems

Katanga shares fall to lowest level since 2005
November 12, 2008, National Post, by David Pett
Mining, copper, Katanga, cobalt

Shares in Katanga Mining Ltd. are down 27% to 94¢ Wednesday afternoon following news that copper and cobalt production at Katanga's Luilu metallurgical plant in the Democratic Republic of Congo will likely be delayed between two and four weeks due to a transformer fire.

"Fortunately, the fire was quickly brought under control and no injuries were reported, said interim CEO Steven Issacs. "Revenues are unlikely to be impacted in the short term due to the immediate availability of finished metal inventories. We expect production to resume shortly after a replacement transformer is fitted." Mr. Issacs added that operations at Kamoto Underground Mine and the Kamoto and Kolwezi Concentrators are not affected by the fire.

Also weighing on Katanga's stock price, which hit 90¢ in morning trading, its lowest intraday level since 2005, is the company's dwindling cash position, says UBS analyst Onno Rutten .

"Katanga has only $178-million in cash on hand remaining and we estimate it cannot continue with its current operations without access to external financing by Q1/09, Mr. Rutten told clients in a note. "With the Mining Contract Review in the DRC preventing access to most conventional sources of financing, we believe that there is a risk of equity dilution or business interruption."

The analyst also expressed concern that ramp-up of the Kamoto underground mine continues to lag expectations in both tonnes and grade, adding "Katanga's lack of funding could result in a further downgrade of long-term production capability relative to our conservative 170,000 tonne projection."

He reduced his price target by 13% from $1.60 to $1.40 and maintained his "neutral" rating.