Glencore Xstrata plc: Merger of Mutanda and Kansuki mining operations

glencore xestrata25 July, 2013
Glencore  Xstrata  plc  (“Glencore”) is pleased to announce that it has now completed  the  merger  of Mutanda Mining Sarl (“Mutanda”) and Kansuki Sarl (“Kansuki”)  (the  “Merger”),  as  previously communicated.  The Merger has been  implemented by way of the absorption of Kansuki into Mutanda with the consideration for such absorption being the issue of new Mutanda shares.
Following  completion of the Merger, Glencore has a 54.5 per cent. indirect interest  in  the  enlarged  operations, thereby giving it majority control over  the  merged  entity  and  its  operations. The remaining interests in Mutanda  are  indirectly  held  14.5  per cent. by High Grade Minerals S.A. (“HGM”) and 31 per cent. by Rowny Assets Limited, a subsidiary of Fleurette Properties Limited (the “Rowny Interest”).
Mutanda  is a developed high grade copper and cobalt producer which in 2012 produced  87k  and  9k  of  copper  and  cobalt  respectively.  The Kansuki concession  is  a  185  square  kilometre copper and cobalt pre-development project  bordering  the  Mutanda  concession.  A  total  of $641 million of capital  expenditure  for the mine and plant development has been committed of which $570 million has been spent.
The  combined mining operations at Mutanda/Kansuki have the potential to be a  major  asset  in the DRC. The operations are expected to have annualized production  capacity  of  200 ktpa of copper cathodes and 23 ktpa of cobalt hydroxide.  Working  closely  with  Fleurette,  significant  synergies  are expected  to  be  available  to  the  joint  operations,  including  shared management,  power,  tailings,  infrastructure  and the joint mining of the shared high grade ore body.
Glencore  has  life  of  mine off-take agreements for all copper and cobalt product produced by the combined mining operations.
Glencore  has  the  right,  subject  to  the terms of a put and call option agreement,  to  acquire  in  the  period  between  15  December 2013 and 31 December  2013 the remaining 14.5 per cent indirect equity interest held by HGM for a total cash consideration of US$430 million.
Glencore  also has the right to acquire from Rowny, and Rowny has the right
to  sell  to  Glencore,  50%  of  the  Rowny  Interest in July 2016 and the
remainder in July 2018 at fair market value.