April 23, 2018 / 4:53 PM / a month ago

Shares in cobalt miner Katanga slump on legal threat in DRC

April 23 (Reuters) - Shares in Democratic Republic of Congo (DRC) copper and cobalt miner Katanga Mining Ltd lost nearly a third of their value Monday after it said the central African country’s state-owned mining company had taken steps to dissolve one of its units.

Katanga said late on Sunday that Gécamines had begun legal proceedings against Kamoto Copper Company, which is 25 percent owned by the state-owned miner and 75 percent by Katanga, due to an ongoing capital shortfall at Kamoto. A court hearing is scheduled for May 8 in the DRC.

Katanga, which is 86-percent owned by global miner Glencore Plc, is ramping up production in the DRC that could see it become the world’s biggest producer of cobalt, one of the hottest commodities of the past year.

The DRC produces nearly two-thirds of the world’s cobalt, a byproduct of its copper mines that is a critical ingredient in batteries for electric vehicles, a market that is expected to expand rapidly over the next decade.

The DRC has adopted a tougher approach to in-country miners as it seeks a bigger share of profits as commodity prices rise. DRC President Joseph Kabila in March signed into law a new mining code that raises royalties and taxes on miners.

“Gécamines appears to be seeking a meaningful capital injection into KCC (Kamoto Copper Company) which would lower the entity’s debt burden and unlock value for the state-owned miner,” Macquarie analysts said in a note to clients.

Katanga’s shares listed in Toronto fell as much as 30 percent to C$1.25 even as Katanga said it was assessing options to fix the capital shortfall and ensure Kamoto keeps operating, including converting debt to equity or forgiving a portion of Kamoto’s debt.

By early afternoon the shares were off their lows at C$1.30, down 27 percent. Glencore’s shares were flat. (Reporting by Nicole Mordant in Vancouver Editing by Scott Malone and Grant McCool)

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