The Rights will also entitle any shareholder who exercises in full the Basic Subscription Privilege attached to their Rights to subscribe for additional Common Shares
Katanga Mining Limited (TSX: KAT) (“Katanga” or the “Company”) announces today that it has filed a preliminary short form prospectus with securities regulatory authorities in each of the provinces and territories of Canada in respect of an offering of rights (“Rights”) to purchase common shares of the Company (“Common Shares”) to raise approximately CDN$7.6 billion (the “Rights Offering”). Glencore has agreed to accept the Rights Offering proceeds of approximately CDN$7.6 billion or the equivalent in Common Shares issued from treasury under the Rights Offering to repay US$5.8 billion of debt to Glencore (based on a five day average CDN$/US$ exchange rate when the Subscription Price (as defined below) is determined). Accordingly, the Rights Offering proceeds will fluctuate depending on the five day average CDN$/US$ exchange rate in effect when the Subscription Price is determined). An affiliate of Glencore plc (“Glencore”), which owns approximately 86.3% of the Company’s outstanding Common Shares, will provide a standby commitment such that all Common Shares available for purchase under the Rights Offering will be fully subscribed. The Company will use the entirety of the proceeds of the offering to repay US$5.8 billion of debt owed to an affiliate of Glencore under the Glencore Loan Facilities (as described below), with approximately US$1.5 billion of debt owed to Glencore (“Glencore Debt”) being retained by the Company. Accordingly, Glencore is not committing any new monies to Katanga as a result of the Rights Offering. The Offering will lead to a reduction of the debt due to Glencore of US$5.8 billion and a corresponding increase in Common Shares in Katanga held by Glencore (or, to the extent that other shareholders take up their Rights, cash to Glencore).
Summary of Rights Offering
Pursuant to the Rights Offering, all eligible shareholders of Katanga (subject to applicable law) will receive one Right for every Common Share owned on the record date (the “Record Date”). The Rights Offering will include an additional subscription privilege entitling holders of Rights who have fully exercised their Rights to subscribe for additional Common Shares, if available, that are not otherwise subscribed for under the Rights Offering.
In accordance with the rules of the Toronto Stock Exchange (“TSX”), and as provided in the standby purchase agreement entered into between the Company and Glencore (the “Standby Purchase Agreement”), the subscription price for the Common Shares to be purchased upon exercise of the Rights (the “Subscription Price”) will represent a 25 percent discount to the volume weighted average price of Common Shares on the TSX for the five trading days immediately prior to the day the final short form prospectus for the Rights Offering (the “Final Prospectus”) is filed.
Calculated as of today, each Right would entitle an eligible shareholder to purchase approximately 15 Common Shares (the “Basic Subscription Privilege”), being the number of Common Shares as is equal to approximately CDN$7.6 billion (which figure is based on a five day average CDN$/US$ exchange rate as of November 6, 2019), divided by the Subscription Price, and further divided by the number of Common Shares outstanding at the time of pricing (currently 1,907,380,413 Common Shares). The foregoing is provided for illustrative purposes only and the number of Common Shares to which an eligible shareholder is entitled will fluctuate depending on the five day average CDN$/US$ exchange rate in effect when the Subscription Price is determined. Where the exercise of Rights would otherwise entitle a holder of Rights to receive fractional Common Shares, the holder’s entitlement will be reduced to the next lowest whole number of Common Shares. The Company will not issue fractional Common Shares or pay cash in lieu thereof.
The Rights will also entitle any shareholder who exercises in full the Basic Subscription Privilege attached to their Rights to subscribe for additional Common Shares, not otherwise subscribed for under the Rights Offering by other shareholders under their Basic Subscription Privilege, pursuant to an additional subscription privilege (“Additional Subscription Privilege”). The period during which Rights may be exercised under the Rights Offering will be determined at the time of filing the Final Prospectus.
Katanga has applied to have the Rights listed for trading on the TSX. The approval of such listing is subject to the Company fulfilling all of the listing requirements of the TSX.
Source: Company Press Release