Katanga Mining Ltd. (fka KATFF)

[JohnCM]

I would like some clarity here and how this litigation may have an adverse affect on a new shareholder.

DRC Litigation Updates

As previously disclosed, on April 20, 2018, the Company's joint venture partner, the Democratic Republic of Congo ("DRC") state-owned company La Générale des Carrières et des Mines ("Gécamines"), in the Company's 75% DRC operating subsidiary Kamoto Copper Company ("KCC"), commenced legal proceedings to dissolve KCC following KCC's failure to address its previously disclosed capital deficiency or, alternatively, if the Court were to provide KCC with a period of time within which to regularize the situation, to request the appointment of an expert to assess and report to the Court on KCC's financial position and its recapitalization plan (the "Capital Deficiency Proceedings").

A hearing before the Kolwezi Commercial Court (the "Kolwezi Court") on the Capital Deficiency Proceedings was initially scheduled to be held in the DRC on May 8, 2018. Prior to the May 8, 2018 hearing, as a precautionary measure, the Company obtained a decision from the Supreme Court of the DRC on May 4, 2018 allowing KCC to challenge the competency of the Kolwezi Court to rule on the Capital Deficiency Proceedings. As a result of the decision of the Supreme Court, the Kolwezi Court concluded on May 8, 2018 that the previously scheduled Capital Deficiency Proceedings should be suspended until after the Supreme Court renders its decision. The date of the first hearing of the Supreme Court was originally scheduled for June 15, 2018 but has been moved to May 18, 2018.TODAY!!

Both prior to and subsequent to the April 20 notice, the Company had sought to negotiate a regularization of the capital deficiency with Gécamines, and the Company would prefer to resolve the capital deficiency through negotiations with Gécamines to achieve a resolution.

Pursuant to an order dated April 30, 2018 from the Kolwezi Court, KCC's Chairman is currently prevented from holding a shareholder or board meeting of KCC in relation to the capital deficiency of KCC. The Company is continuing to assess options for regularizing the deficiency, including the conversion of a portion of existing intercompany debt owed by KCC to the Company (which is eliminated on consolidation) into equity or forgiving a portion of such debt, as well as methods through which the regularization could be achieved, either on KCC’s own initiative or through negotiations with Gécamines. Any such outcome would impact the distribution of future cash flows earned by KCC, which might in turn have a materially adverse impact on the Company but would not be expected to have a material impact on the assets, liabilities and net assets of the Company and would be expected only to result in a shift within equity attributable to shareholders of the Company and non-controlling interests.

Separately, on April 27, 2018, Ventora Development Sasu ("Ventora") a company affiliated with Mr. Dan Gertler, served a freezing order in the DRC against KCC in the amount of US$2.28 billion. As previously disclosed, in December 2017 the United States government designated Mr. Gertler and several of his affiliated companies as Specially Designated Nationals ("SDNs") by way of Executive Order 13818. Ventora alleges that KCC has breached its obligation to make royalty payments to Ventora, by indicating that it will not pay such royalties as a result of Mr. Gertler's designation as a SDN. Ventora asserts that if its claim for breach is upheld it will be entitled to damages of approximately US$2.28 billion, which it alleges is the value of the future royalties due to it under a tripartite royalty agreement between KCC, Gécamines and, Africa Horizons Investment Limited (“AHIL”), another entity affiliated with Mr. Gertler and which Ventora claims has assigned the royalty rights to it. On April 30, 2018, Ventora served an injunction to pay against KCC for a total amount of US$2.86 billion, which includes additional legal fees.

KCC disputes the assignment by AHIL of its rights under the Tripartite Agreement to Ventora and that Ventora has any claim against KCC under such agreement. The Tripartite Agreement is subject to English Law and the exclusive jurisdiction of the English Courts. The Company denies that KCC is in breach of any of its obligations under the Tripartite Agreement and also entirely rejects Ventora’s calculation of the value of the future royalties allegedly owed to Ventora. KCC is vigorously contesting the freezing order and the injunction to pay. On May 1, 2018, KCC obtained temporary injunctive relief from a London Court that prohibits Ventora from taking further action in respect of its claims in the DRC.

The Company continues to assess the impact of the freezing order on KCC’s operations in the DRC. Although the freezing order has not to date had a material impact on KCC's operations, there is a risk that the freezing order and injunction to pay may materially and adversely impact KCC's operations in the future.