Katanga to buy Kamoto contract-operator

Katanga Mining (KAT-T) is purchasing the operator of its 75%-owned Kamoto copper-cobalt mine in the Democratic Republic of the Congo (DRC) to save on mining costs.

The contractor, Kamoto Operating (KOL), receives a percentage of revenue as payment for running the mine for Katanga and Gecamines, which owns the remaining 25% stake in the project.

Katanga chief financial officer Nick Brodie says that by making the acquisition of KOL, Katanga will eliminate that surcharge.

Wayland Management and Tain Holdings own KOL and in return for it will receive a cash payment of US$1.6 million and 12 million Katanga shares. Those shares were worth just over $7 million at presstime.

For much of the last year Katanga has been under financial duress as it moves to expand production at Kamoto to 70,000 tonnes copper and 4,000 tonnes cobalt a year.

To make ends meet this past winter Katanga turned to Glencore and effectively agreed to exchange a majority stake in the company for an infusion of funds.

As part of the rescue package Katanga has extended to Glencore just over 700 million shares in a US$250 million rights offering and arranged a US$50 million bridge loan with the Swiss-based metals giant. As of July 7 that gave Glencore directly and indirectly a 77.9% stake in Katanga.

Katanga expects to complete the mill expansion in September.

During the last quarter ending June, 30, 2009, production was already well on its way up. At Katanga’s underground operation it mined 255,129 tonnes ore grading 4.02% copper and 0.51% cobalt and in its open pit it churned out 425,372 tonnes ore grading 1.29% copper and 0.83% cobalt.

Respectively the tonnage mined represented a 32% and 106% improvement over the previous quarter.

In the DRC Katanga holds considerable copper and cobalt assets. Katanga’s proven and probable mineral reserves stand at 66 million tonnes grading 3.5% copper and 0.48% cobalt.

Katanga’s measured and indicated resources weigh in at 172 million tonnes grading 4.8%copper and 0.43% cobalt.