Katanga Mining Ltd Ord KATFF

Guessing the Outcome

[topdop]

These are the mechanics of a Rights Offering ("RO") as well as some guesstimates as to the outcome and note, everything is SUBJECT TO CHANGE.

KAT has announced it will raise US$5.7BB in a RO per the PR wherein one Right will allow the holder to buy 15 new shares at a 25% discount to the 5 day vwap calculated prior to the Final Prospectus being published. Those "new shares" numbers were published for illustrative purposes only and WILL GO UP.

The RO is to be backstopped by Glencore meaning they have a Right to their allocation as a 86.3% shareholder and a guarantee to be allocated all other Rights not taken up.

Importantly, Glencore also announced that they are NOT putting any new money into KAT by way of the RO.

Remember that 100% of KAT's debt is owned by 100% of its shareholders, so if the minority shareholders don't subscribe for their portion of the debt for repayment, then Glencore's guarantee gives them 100% allocation to those remaining Rights thereby, more free "new shares" go to them for those purchases.

Historically Final prospectuses are published about three weeks from the date of the Preliminary filing so I'm guessing we should see it come out aftermarket Wednesday 27th November or early before market Thursday 28th November.

At an exchange rate of Cad$1 = US$0.756 (KAT's chosen rate will be published in the Final Prospectus), the company will be selling Cad$7.672BB of new RO shares.

Due to the punitive ask to conduct the backstopped RO, I think it highly unlikely that there will be anything like a full subscription to it. In fact, I think only 1 in 20 of existing minority shareholders (say 5%) might subscribe meaning Glencore will take up 95% of our minority shareholder RO Rights shares, also free, against the Cad$7.672BB debt we all owe them and to be extinguished by the issue of new RO shares.

This means that Cad$339MM is likely to be received in cash for RO shares and Cad7.288BB against debt for RO shares.

At what price?

I have been watching CIBC on our ticker for months now and with the publication of the Preliminary Prospectus, we were told that CIBC were appointed as Broker/Adviser to KAT. Then it all made sense to me.

With that said, I also now believe CIBC are conducting a market stabilization program which would be attempting to stabilize our ticker at or around the 16c mark.

So if the RO discount of 25% is to be honoured, that will mean Rights shares will be priced at around 12c. This will then require a much higher actual distribution ratio per Right than that published previously for illustrative purposes (15 for 1).

How many new RO shares might need to be printed?

7.672BB / 0.12 = 63.933BB

Answer: nearly 64 billion new shares! So what might be the actual distribution ratio per Right? The answer is the current KAT register divided by the new RO shares to be printed:

1,907,380,413 / 63,933,000,000 = 33.52

These guesses point to a more realistic actual distribution ratio per Right of 33.52. So no, not 15.

I have 1MM shares. What does that mean for me?

It means I have a Right to buy 33.52MM more shares at the discounted RO price of 12c/share.

This would cost me Cad$4.02MM... and no, I won't be subscribing.

What would our Register look like after? We would have 65.84 billion shares outstanding and Glencore would have gone from 86.3% owner to 99.3% owner. Our Market Cap at announcement was Cad$667MM and after extinguishing our Cad$7.672BB debt owed, new Market Cap would go to:

(7.672 + 0.667) - 1.5 = Cad$6.839BB

Divide that by 65.84 billion shares outstanding and it equals 10.4c

It's not looking good. But if we can become a five bagger in 36 months from there, when Cu and Co are rockin' and the assets are rockin', then that takes us to around 50c.

Add in a Premium from Glencore to finally clean up all this mess and take out the last 0.7% they don't own? Maybe we still might get to 70c...

These assumptions require LOTS MORE TIME but don't forget our mining assets would hereafter retain much a more efficient gearing and - hopefully - a much better C1 Total Operating Cost number as well as very strong, healthy realized Cu and Co prices.

I hope the above helps... and if there might be any errors, kindly let us all know!

These are my views only. Thanks for reading.

[gang54]

Thanks Topdop for the detailed analysis! All make sense. Regardless, I will hold my shares until 70 or 7 cents - it makes no sense to sell now.

[DasuDasu1]

That's a next level of delusion if you think the remaining investors in this stock will pump several hundreds of millions to essentially fill Glencore coffers. I'm no expert on corporate law, but it seems that taking a company private would require convincing 90% of the minority shareholders. Take-over or issuer bid 188 (1) If within 120 days after the date of a take-over bid or an

[topdop]

@DasuDasu1 thanks for your wonderful contributions. A few realities buddy: Glencore have a waiver against the Majority of the Minority rule. Don't people read the disclosed documents? I guess not... In any event, once any Insider goes past 90% KAT ownership, the OSC waiver kicks in and Minority Shareholders lose that vote power. It's highly unlikely the OSC would find as you accuse; some

[DasuDasu1]

Ah, if there is a waiver, then the writing on the wall is even more clear. This fills Glencore's coffers because the money from the RO will directly be used to repay Kat's debt, which is of course owed to none other than our favorite friend. Kat would still be distressed, overdiluted, and subjet to Glencore's whims after the fact.