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Glencore unveils US$5.6B DRC restructuring

Glencore has unveiled a sweeping US$5.6B restructuring of Katanga Mining Ltd (KML), its embattled copper company in the Democratic Republic of Congo (DRC).

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The move is designed to settle a dispute with Gécamines, DRC’s state-owned mining company, concerning a huge debt accrued over the past decade.

 

Gécamines is a 25% joint-venture partner in KML’s 75% operating subsidiary, Kamoto Copper Company (KCC).

 

KML said that, together with KCC, it had entered into a settlement agreement with Gécamines (among others) “to terminate legal proceedings brought by Gécamines in the DRC courts, and resolve KCC’s previously disclosed capital deficiency”.

 

Glencore said KML will issue US$5.6B in stock that will be used to retire the high-interest debt. The company had been saddled with US$9.2B in debt, with the majority owed to Glencore.

 

The Swiss mining giant said that the key highlights of Katanga’s settlement agreement with Gécamines are as follows:

  • Conversion of US$5.6B of KCC’s total debt of approximately US$9B into new KCC equity, such that, with retroactive effect as at 1 January 2018, KCC has US$3.45B of debt to KML Group, bearing interest at the lower of US$ Libor 6 month + 3% and 6% per annum.
  • Katanga and Gécamines’ shareholdings in KCC remain unchanged at 75% and 25%, respectively.
  • A one-time payment to Gécamines of US$150M relating to historical commercial disputes.
  • Certain amendments to the dividend payment and free cash flow provisions of KCC including an amortisation schedule for the repayment of the residual debt.
  • Payment of approx. US$41M to Gécamines in relation to outstanding expenses incurred as part of an exploration program.
  • Waiver by KCC of its entitlement (or financial equivalent) to replacement reserves and associated incurring of drilling costs on Gécamines’ behalf, amounting to US$285M and US$57M, respectively.
  • Withdrawal of all legal action by Gécamines.
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