KATANGA MINING LIMITED COVID-19 Update on Operations
On
Consistent with the approach adopted by our principal shareholder, Glencore plc, the Company continues to assess the risks related to the Company's business and adapt its plans and actions in consultation with its local stakeholders.
Various governments have imposed far-reaching restrictions on daily life and economic activity, and the Company has been engaging with relevant authorities and other stakeholders to understand the impact of these measures on the Company's operations.
The Company has introduced a number of precautionary measures in response to the COVID-19 pandemic. This includes the implementation of health monitoring and travel history controls for international arrivals, temperature monitoring at its mine site entry points, enhanced hygiene and cleaning measures, social distancing and measures to identify higher risk groups. The Company also demobilized non-essential work activities towards the end of Q1 2020, which will impact the timing of the commissioning of various major capital expenditures (see "Acid Plant" below).
While there were no material disruptions to the Company's productive operations during Q1 2020, there can be no certainty that the COVID-19 pandemic and the restrictive measures implemented by the government of the
Update on Major Projects as at
Cobalt Projects
The permanent modifications to dryer #1 have been completed as part of the cobalt debottlenecking projects (the "Cobalt Projects") and the final modifications of dryer #2 are expected to be completed in Q2 2020.
Acid Plant
As previously announced, the Company continued to progress towards commissioning of its sulphuric acid, sulphur dioxide production and steam turbine generator project at KCC (the "Acid Plant"). However, commissioning of the Acid Plant has been delayed as a result of the inability to mobilize necessary commissioning experts to site due to travel and social distancing restrictions imposed as a result of the COVID-19 pandemic. The Acid Plant is now expected to be commissioned in the second half of 2020, rather than in the first half of 2020.
Production highlights during the three months ended
Copper and Cobalt Production
Copper cathode production increased to 67,298 tonnes in Q1 2020 from 65,402 tonnes in Q4 2019.
Cobalt contained in hydroxide production decreased to 5,296 tonnes in Q1 2020 from 6,173 tonnes in Q4 2019.
Mining
Three months ended | ||||
2020 | 2019 | 2019 | ||
Ore mined*/** | ||||
KOV open pit | tonnes | 1,950,925 | 1,851,272 | 1,082,137 |
Mashamba East open pit | tonnes | 1,067,613 | 1,156,339 | 1,086,595 |
Total open pits | tonnes | 3,018,538 | 3,007,611 | 2,168,732 |
KTO underground | tonnes | 196,379 | 223,437 | 139,305 |
Total ore mined | tonnes | 3,214,917 | 3,231,048 | 2,308,037 |
Waste mined and primary development* | ||||
KOV open pit | tonnes | 5,780,830 | 8,204,253 | 7,282,726 |
Mashamba East open pit | tonnes | 2,060,021 | 1,679,714 | 2,977,252 |
Total open pits | tonnes | 7,840,851 | 9,883,967 | 10,259,978 |
KTO underground | ||||
primary development | meters | - | - | 137 |
Total waste mined*** | tonnes | 7,840,851 | 9,883,967 | 10,259,978 |
Total material mined | ||||
KOV open pit | tonnes | 7,731,756 | 10,055,526 | 8,364,863 |
Mashamba East open pit | tonnes | 3,127,634 | 2,836,052 | 4,063,847 |
Total open pits | tonnes | 10,859,390 | 12,891,578 | 12,428,710 |
KTO underground | tonnes | 196,379 | 223,437 | 139,305 |
Total material mined*** | tonnes | 11,055,769 | 13,115,015 | 12,568,015 |
Total contained copper | tonnes | 98,651 | 92,821 | 67,616 |
Ore summary | ||||
Total primary ore mined | tonnes | 2,284,440 | 2,207,302 | 1,583,829 |
Average Cu grade | % | 3.93 | 3.81 | 3.87 |
Average Co grade | % | 0.44 | 0.49 | 0.38 |
Total low-grade ore mined | tonnes | 657,884 | 596,925 | 548,178 |
Average Cu grade | % | 1.11 | 1.05 | 0.96 |
Average Co grade | % | 0.28 | 0.36 | 0.20 |
Total cobalt ore mined | tonnes | 272,594 | 426,821 | 176,030 |
Average Co grade | % | 0.57 | 0.56 | 0.73 |
Average Cu grade | % | 0.58 | 0.55 | 0.57 |
Total ore mined | tonnes | 3,214,917 | 3,231,048 | 2,308,037 |
Average Cu grade | % | 3.07 | 2.87 | 2.93 |
Average Co grade | % | 0.42 | 0.48 | 0.37 |
* | These segments include classification of ore volumes into different categories, being primary copper containing ore, low-grade copper containing ore (but still above cut-off grade) and cobalt containing ore (that contains copper under the copper cut-off grade but cobalt over the cobalt cut-off grade). The primary ore component is defined as having a copper grade of greater than 1.25% and the low-grade component is defined as having a copper grade between 0.65% and 1.25%. The cobalt ore component is defined as having a copper grade of less than 0.65% and cobalt grade greater than 0.30%. |
** | Excludes any ore hydro-mined out of |
*** | Underground waste is excluded. |
Total ore mined decreased to 3,214,917 tonnes in Q1 2020 from 3,231,048 tonnes in Q4 2019 but increased from 2,308,037 tonnes in Q1 2019.
Total waste mined decreased to 7,840,851 tonnes in Q1 2020 from 9,883,967 tonnes in Q4 2019 (10,259,978 tonnes in Q1 2019).
Total contained copper increased to 98,651 tonnes in Q1 2020 from 92,821 tonnes in Q4 2019 (67,616 tonnes in Q1 2019).
The decrease in total material mined in the open pits in Q1 2020 compared to Q1 2019 aligns with the current optimized mine plan and ore delivery requirements for whole ore leach ("WOL").
The decrease in total material mined in the combined open pits in Q1 2020 compared to Q4 2019 reflects the continuation of the wet season in the DRC. The impact of the wet season on mining rates is accounted for in KCC's mine planning process and the results are in line with the mine plan.
The ongoing mining and stockpiling of low-grade ore reflects the optimization of the long-term plant feed strategy. The low-grade ore is stockpiled and expected to be fed into the processing plant in the future.
Kamoto Concentrator
Three months ended | |||||
2020 | 2019 | 2019 | |||
Total material milled and processed | tonnes | 2,334,748 | 2,346,569 | 2,707,115 | |
KITD material processed | tonnes | 405,187 | 437,969 | 747,327 | |
Cu grade in ore | % | 1.55 | 1.35 | 1.50 | |
Co grade in ore | % | 0.18 | 0.17 | 0.18 | |
Open pit ore milled | tonnes | 1,778,442 | 1,692,495 | 1,818,399 | |
Cu grade in ore | % | 3.92 | 3.88 | 3.41 | |
Co grade in ore | % | 0.44 | 0.50 | 0.37 | |
Underground ore milled | tonnes | 151,118 | 216,105 | 141,388 | |
Cu grade in ore | % | 3.79 | 3.81 | 3.64 | |
Co grade in ore | % | 0.53 | 0.58 | 0.52 | |
Production | |||||
Oxide concentrate | tonnes | 25,009 | 21,887 | 37,536 | |
Sulphide concentrate | tonnes | 31,700 | 35,557 | 29,750 | |
Total concentrate produced | tonnes | 56,709 | 57,444 | 67,286 | |
Cu grade in concentrate | % | 23.51 | 24.61 | 19.25 | |
Co grade in concentrate | % | 2.15 | 2.81 | 2.14 | |
Oxide feed received at Luilu | tonnes | 1,756,651 | 1,688,262 | 1,822,820 | |
Cu grade in oxide feed | % | 3.66 | 3.55 | 3.12 | |
Total contained copper | tonnes | 77,603 | 74,024 | 69,818 | |
Total material milled and processed decreased to 2,334,748 tonnes in Q1 2020 from 2,346,569 tonnes in Q4 2019 (2,707,115 tonnes in Q1 2019).
Total concentrate produced decreased to 56,709 tonnes in Q1 2020 from 57,444 tonnes in Q4 2019 (67,286 tonnes in Q1 2019).
Total oxide feed received at Luilu increased to 1,756,651 tonnes in Q1 2020 from 1,688,262 tonnes in Q4 2019 but decreased compared from 1,822,820 tonnes in Q1 2019.
Total contained copper in concentrate and oxide feed produced increased to 77,603 tonnes in Q1 2020 from 74,024 tonnes in Q4 2019 (69,818 tonnes in Q1 2019).
The increase in total contained copper in concentrate and oxide feed produced in Q1 2020 compared to Q1 2019 was driven by higher comparable open pit copper feed grade.
The decrease in total material milled and processed in Q1 2020 compared to Q4 2019 was due to a decreased KITD processing rate caused by heavy rainfall. This was offset by an increase in open pit ore milled.
Luilu metallurgical plant
Three months ended | |||||
2020 | 2019 | 2019 | |||
WOL feed – oxide concentrate* | tonnes | 25,009 | 21,887 | 37,536 | |
WOL feed – oxide feed | tonnes | 1,756,651 | 1,688,262 | 1,822,820 | |
Total oxide feed | tonnes | 1,781,660 | 1,710,149 | 1,860,356 | |
Total oxide Cu grade | % | 3.80 | 3.67 | 3.28 | |
Total oxide Co grade | % | 0.42 | 0.48 | 0.37 | |
Sulphide roaster feed | tonnes | 31,154 | 34,962 | 26,772 | |
Sulphide Cu grade | % | 28.62 | 29.44 | 26.92 | |
Sulphide Co grade | % | 2.84 | 3.71 | 3.06 | |
Production | |||||
Copper cathode | tonnes | 67,298 | 65,402 | 57,175 | |
Cobalt contained in hydroxide | tonnes | 5,296 | 6,173 | 3,511 | |
Total copper cathode produced increased to 67,298 tonnes in Q1 2020 from 65,402 tonnes in Q4 2019 (57,175 tonnes in Q1 2019).
Total cobalt contained in hydroxide decreased to 5,296 tonnes in Q1 2020 from 6,173 tonnes in Q4 2019 due to a decrease in cobalt oxide feed grades. Total cobalt contained in hydroxide however increased to 5,296 tonnes in Q1 2020 from 3,511 tonnes in Q1 2019.
The increase in Q1 2020 copper cathode and cobalt contained in hydroxide production compared to Q1 2019 was driven by higher feed grades to the Luilu metallurgical plant.
The increase in copper cathode production in Q1 2020 from Q4 2019 was due to progress made on the electrowinning ("EW") refurbishment program and current efficiency improvements as well as maintaining high ore feed rates and copper grades to the
Trading Update and Outlook
Given the increased macro-economic uncertainty caused by the COVID-19 pandemic, the Company has implemented a number of measures to minimize cash outflows, while protecting value for when conditions improve. These measures include:
- Preserving cash flow through cost saving initiatives and operational efficiency improvements.
- Suspending certain discretionary activities and associated spend.
- Suspending certain capital expenditure not related to sustaining day-to-day operations or critical projects.
- Optimizing working capital levels.
- Moratorium on hiring new staff.
In addition to the above cash preservation measures, KCC will continue to progress its operational excellence program ("OE Program"), following from the now completed comprehensive business review. The OE Program targets mining efficiencies and processing improvements as well as enhancements to product quality realizations and overhead cost reductions.
As previously reported, the fully detailed OE Program defines the scope for margin improvements in the order of
These improvements are expected to materially increase the cash flow generation of KCC beginning in 2022, when it is projected that targeted life of mine average production will be approximately 300 ktonnes of copper and 30 ktonnes of cobalt, resulting in a steady state copper unit cash cost of
Production guidance for copper and cobalt is as follows:
Commodity | Units | FY2020 |
Copper(1) | Ktonnes | 270 |
Cobalt(2) | Ktonnes | 26(3) |
Notes: | |
(1) | Annual copper production guidance is subject to +/- 15 ktonnes variation |
(2) | Annual cobalt production guidance is subject to +/- 2 ktonnes variation |
(3) | Updated from 29 ktonnes as announced in the Company's press release dated |
It should be noted that production in any given year will fluctuate as a function of numerous factors, including the availability and utilization of plant and equipment, geological and mining conditions, logistics, availability of reagents, availability of electricity, macro-economic factors such as commodity prices, input costs and geopolitical developments (including the DRC mining code).
Based on the above, the Company expects operating cash flow less capital expenditure to be modestly positive for the year, absent any further negative developments or impacts from COVID-19 or otherwise.1 As at the end of Q1 2020, KCC had undrawn liquidity of
KCC also has sufficient cash and available liquidity to make the potential payments of up to
_____________________________________ | |
1 Assumes a copper price for the remainder of 2020 of |
Qualified Person
About
Forward Looking Statements
This press release may contain forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or describes a "goal", or variation of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. This press release may contain forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or describes a "goal", or variation of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved.
All forward-looking statements reflect the Company's beliefs and assumptions based on information available at the time the statements were made. Actual results or events may differ from those predicted in these forward-looking statements. All of the Company's forward-looking statements are qualified by the assumptions that are stated or inherent in such forward-looking statements. The key assumptions that have been made in connection with the forward-looking statements include the following: that the Company will complete the ramp up of full drying capacity as part of the Cobalt Projects in the time expected and realize the anticipated benefits of the Cobalt Projects; the timeline to commission the Acid Plant; there being no significant disruptions affecting the operations of the Company whether due to pandemics (including COVID-19), legal disputes, judicial action, labour disruptions, supply disruptions, power disruptions, rollout of new equipment, damage to equipment or otherwise; permitting, development, operations, expansion and acquisitions at KCC being consistent with the Company's current expectations; the Company being able to confirm the margin and cash flow improvements identified by its previously announced comprehensive business review and then successfully implementing any such improvements; continued recognition of the Company's mining concessions and other assets, rights, titles and interests in the DRC; the continued effectiveness of interim solutions for uranium identified in cobalt or the completion of the ion exchange plant or other long-term solution in the time contemplated, at the expected cost of construction; political and legal developments in the DRC being consistent with its current expectations; the continued provision or procurement of additional funding from Glencore plc for operations; new equipment performing consistent with expectations; the exchange rate between the US dollar, South African rand, British pounds, Canadian dollar, Swiss franc, Congolese franc, Euro and Australian dollar being approximately consistent with current levels; certain price assumptions for copper and cobalt; prices for diesel, natural gas, fuel oil, electricity and other key supplies being approximately consistent with current levels; production, operating expenses and cost of sales forecasts for the Company meeting expectations; the accuracy of the current ore reserve and mineral resource estimates of the Company (including but not limited to ore tonnage and ore grade estimates); and labour and material costs increasing on a basis consistent with the Company's current expectations.
Forward-looking statements involve known and unknown risks, future events, conditions, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from any future results, prediction, projection, forecast, performance or achievements expressed or implied by the forward-looking statements. These risks include, but are not limited to: economic factors such as future prices of copper and cobalt, currency fluctuations, energy prices and other general costs; COVID-19 and potential pandemic disease(s) impacting the workforce in the DRC leading to reduced or no production and delays in capital projects; claims or damages arising from the sales of copper and cobalt; the timeline to the completion of the Acid Plant and availability of reagents and acid supply; risks related to the land rights agreement with Gécamines, including risks relating to the declaration of a force majeure event resulting from the investigation by the General Prosecutor relating to Gécamines' executives; the impact on the Company's operations in the event the land rights agreement cannot be performed; and the other risks discussed in the Company's most recent annual information form on file with the Canadian provincial securities regulatory authorities and available at www.sedar.com. Although Katanga has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.
The Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events, or otherwise, except in accordance with applicable securities laws.
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