DRC/Chinese/Katanga Mining copper/cobalt deal explained (Source: Mineweb)

Strange rumblings on the near side of Katanga Mining's indirect deal with Chinese interests, via Gécamines.

Author: Barry Sergeant
Posted: Sunday , 10 Feb 2008

JOHANNESBURG -

Katanga Mining (KAT CN, C$14.25 a share), has announced the strange details of a strange Chinese-related deal, after raw facts on the story crept into markets at the end of last month. Katanga Mining, which has just merged with Nikanor, has refuted the notion that it was forced into the transactions.

After requests for comment, Katanga Mining on 29 January issued a statement to the effect that two of the so-called Dima Pits, which include Dikuluwe, Mashamba East and Mashamba West, would be transferred to DRC-parastatal Gécamines. The Dima pits form part of Katanga Mining's substantial assets in the Democratic Republic of the Congo, which lie, in turn, adjacent to Nikanor's assets.

Katanga Mining's statement followed shortly on the astonishing news, attributed to Congolese Mines Minister Martin Kabwelulu, that he had signed a loan deal with China which could lead to the development of "Gécamines' Mashamba [West] and Dikuluwe copper/cobalt projects". Katanga Mining's statement contained zero information on what quid pro quo it had received for the deal, indicating that the deal had been rushed through.

Now for the quid pro quo: Gécamines is to "replace" the Mashamba West and Dikuluwe deposits by 1 July 2015 "with other deposits having a total tonnage of 3,992,185 tonnes of copper and 205,629 tonnes of cobalt", or "pay over time, beginning 1 July 2012", a total of US$825m from Gécamines royalties and dividends received from Katanga Mining.

In a nutshell, Chinese interests - such as Sinohydro Corporation and China Railway Engineering Corporation - will invest around $3bn in infrastructure, and $3bn into the mining deposits, which are held as to 32% Gécamines and 68% as to the Chinese consortium. Then there is a further $3bn earmarked by the Chinese consortium for future investment in infrastructure.

Based on an unpublished document, the Gécamines-China mining JV includes cuvette ("basin") Mashamba, cuvette Dima, Synclinal Dik Colline "D", Kolwezi, containing in total 8.1m tons of copper, and 203 000 tons of cobalt. The deal also includes "a trouver" (literally, "has to find", like the latest deal with Katanga Mining) "Au" (gold), in an amount of 372 tons. The total value of the metals indicated is given as $3bn.

For many decades Gécamines (and its predecessor) ran Luilu, the substantial hydrometallurgical facility now owned by Katanga Mining. The plant was fed with concentrate feed from KOV (now in Nikanor) and Dikuluwe-Mashamba as oxides, and from Kamoto underground (Katanga Mining) as sulphides. (The Kamoto open pit and KOV lie alongside each other, with the inevitability that Katanga Mining and Nikanor were always going to merge.)

In days gone by, the sulphides were roasted to sulphates and then leached together with the oxides. Sulphate was then mixed with water to form sulphuric acid; as such, the wonderful system under discussion had a net acid consumption of zero. Such a system would be no small advantage in the modern world, given shortages of sulphuric acid.

Now that Katanga Mining has merged with Nikanor, the combined entity possesses both the oxides from KOV and the sulphides from Kamoto, once again allowing processing to proceed with zero net acid consumption. This would have made it a lot easier to swallow the deal that Gécamines has struck with Chinese interests.

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