Katanga falls on Q1 results

Just as Katanga Mining (KAT-T) was regaining market favour, the copper and cobalt miner was knocked back again by poor financial results.

Katanga had seen its share price decimated over the past year as crashing metal prices, a mining review in the Democratic Republic of the Congo, and a cash crunch, all convened on the London-based miner.

While a settlement with the government over the mining review, and rebounding copper prices had been winning over investors, high operating costs for the first quarter were looked upon less favourably.

In Toronto on May 19 the company’s shares were off 2¢ to 83¢ on 1.3 million shares traded. The fall off comes on the heels of the company driving its shares price up from a 30¢ close at the end of April to a closing high of $1.07 on May 12.

The Company reported a net loss for the quarter ended March 31, 2009 of US$52 million or 25¢ per share.

Katanga announced total sales for the quarter of US$47 million – a figure that breaks down into US$27.8 million for copper cathode, US$10.9 million for cobalt metal, and US$8.4 million for cobalt concentrate sales. Those concentrate sales, however, were from stockpiles produced before the suspension of concentrate production in November 2008, and won’t be relied upon going forward.

The market clearly doesn’t see those numbers as strong enough to steer the company away from its financial straights. At the end of April Katanga was forced to take a US$50 million bridge loan from Glencore and arrange a rights offering to raise another US$250 million.

The loan was done at an interest rate of 8% per year, and is repayable in full at the end of June.

Despite such financial hardship Katanga says it is still on track to finish Phase 2 at its Kamoto project and says it will do so on budget. The new phase is slated to bring production capacity by 70,000 tonnes per year by September.

As for its deal with the DRC’s mining body, Gécamines, the two groups have agreed on an amended joint venture which is to be finalized in the second quarter.

The company’s production came largely from Kamoto’s underground and open pit operations. Underground mining produced 193,378 tonnes of ore with an average copper grade of 3.79% and cobalt grade of 0.46% — a 24% increase on the previous quarter.

As for its open pit operations, the company announced that 206,176 tonnes of ore was mined at an average copper grade of 2.31% and a cobalt grade of 0.81%. The mined tonnage represents a 59% increase from the previous quarter.

Katanga credited the higher production to its installment of a new mining fleet.