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Glencore's Katanga working to address capital concerns at Kamoto
(WebFG News) - Glencore's 74.4% subsidiary Katanga Mining announced on Monday that its Democratic Republic of the Congo state-owned joint venture partner, La Générale des Carrières et des Mines (Gécamines) in its 75% operating subsidiary Kamoto Copper Company (KCC), has commenced legal proceedings to dissolve KCC.
The FTSE 250 firm said the proceedings followed KCC's failure to address its capital deficiency.
Alternatively, if the court provided KCC with a period of time within which to regularise the situation, Gécamines could request the appointment of an expert to assess and report to the court on KCC's financial position and recapitalisation plan.
"Katanga believes that it has several options to remedy KCC's capital deficiency and avoid KCC's dissolution," the update from Glencore said.
"Katanga will continue to attempt to engage in discussions with Gécamines and will take all other necessary steps to ensure the continuation of the operations of KCC and protect its rights under the law and under its joint venture agreement with Gécamines."
Katanga was reportedly continuing to assess its options for regularising the capital deficiency, including the conversion of a portion of existing intercompany debt owed by KCC to Katanga into equity, or forgiving a portion of such debt.
Any such outcome would impact the distribution of future cash flows earned by KCC, which might in turn have a materially-adverse impact on Katanga but would not be expected to have a material impact on the assets, liabilities and net assets of Katanga and would be expected only to result in a shift within equity attributable to shareholders and non-controlling interests, Katanga explained.
The regularisation of the capital deficiency could be effected by Katanga on its own initiative or through negotiation with Gécamines.
"If Katanga has taken the necessary steps to regularise KCC's capital deficiency and this is confirmed by KCC's statutory auditor on or before the day on which the court renders its judgment on the merits, then the DRC court cannot issue a dissolution order."