Building a Leading Copper Company 2006 ANNUAL REPORT Company Overview Katanga Mining Limited is becoming significant in global copper mining by rehabilitating mines and plants near Kolwezi in the Katanga Province of the Democratic Republic of Congo. The site is getting ready to ship copper in December 2007. By 2011, the complex will produce 150,000 tonnes of refined copper and 5,000 tonnes of refined cobalt a year and will be among the world’s lowest cost producers. Democratic The Company is listed on the Toronto Republic of Congo Stock Exchange under the symbol KAT. Katanga Province Kolwezi Contents President’s Letter 2 Project Overview 5 Social Responsibility 8 Board and Corporate Governance 10 Management’s Discussion and Analysis 11 Consolidated Financial Statements 25 Notes to Consolidated Financial Statements 28 Shareholder Information 40 2006 Highlights Feasibility study confirmed the long-term economic viability of the rehabilitation of the mine complex at Kolwezi Completed acquisition of Kinross Forrest Limited, the original signatory to the Kamoto joint venture Listed Katanga Mining Limited on the Toronto Stock Exchange Assumed control and management of mine site and assets Successfully raised a total of CDN$267.25 million through an equity private placement and corporate debenture Reconstituted board of directors with strong representation from Democratic Republic of Congo Recruited corporate executive team for new London office and operational management team for Kolwezi site Mobilization, site preparation and procurement on track for production late 2007. Katanga Mining Limited 2006 Share Price KATANGA TSX Capped Metals & Mining Index Volume CDN$ Per Share (average) 2006 (millions) High Low Close Quarter 1 12.4 4.68 4.50 4.61 Quarter 2 8.01 6.71 6.47 6.60 Quarter 3 11.9 5.88 5.73 5.81 Quarter 4 16.4 6.12 5.92 6.03 K A T A N G A M I N I N G L I M I T E D 1 President’s Letter By almost any measure, 2006 - Katanga Both of the offer- Mining Limited’s inaugural year - was ings were ove r - exceptional as we staged the Company subscribed and it to undertake its core mission of rebuilding was gratifying to the mines and plants within the Kamoto see the appetite joint venture. from the market, wh i ch is reflective The feasibility study and technical report of confidence in released in April confirmed the long-term the Company and economic viability of our joint venture. On in deve l o p m e n t s June 27, Katanga Mining Limited exercised its in the Democra t i c option to acquire the remaining outstanding Republic of Congo. shares of Kinross Forrest Limited, the owner I am confident that the final stage, a project of a 75 per cent interest in the Kamoto joint credit facility for US$260 million, will venture, and was approved for a full be available for draw d o wn during the listing on the Toronto Stock Exchange. That autumn of 2007. This should complete all same day the joint venture officially took financing needed for the four phase recon- control of the Kolwezi site. struction program required to ach i e v e 150,000 tonnes of annual copper production. The remainder of 2006 entailed a dra m a t i c undertaking to remove thousands of cubic meters of debris and material clogging all plant Staffing achievements sites. By year end, mobilization of people, equipment and material to prepare the wo r k Central to achieving our goal of a ‘fast track’ areas for reconstruction and repair at the reconstruction and start up is staffing of both beginning of 2007 was close to completion. the site and corporate organizations. As the year progressed, most employees for Katanga At the same time, the procurement progra m Mining Limited’s corporate office - newly has been well established in a short time. established in London, England to enhance Detailed engineering, preparing bid our ability to oversee the rehabilitation project specifications, calling tenders, and awarding - were complete. The site group, consisting of contracts for supply and site work were also both operations and reconstruction teams, has largely completed by the end of 2006. come together very well after an international recruiting program. Financing is on track At year end there were just over 1,700 employees working for the Company. It has In 2006, we completed two stages of Katanga been gratifying to see the skills of so many Mining Limited’s three stage capital structure local people brought back into use and to to provide the financing the company needs see first-hand the impact that a regular for the rehabilitation of the mine complex, income has already made on their lives and raising a total of CDN$267.25 million outlook on the future. through an equity private placement and corporate debenture. 2 A N N U A L R E P O R T 2 0 0 6 “The foundation of any mining enterprise is the scale and quality or grade of its reserves and resources. Katanga Mining Limited is a standout in this respect.” A new era in the DRC Strong corporate governance As well as for Katanga Mining Limited, 2006 From the outset, Katanga Mining Limited was a remarkable year for the Democra t i c has been structured to meet standards of Republic of Congo. After so many years of g overnance, risk management, operational i n s t a b i l i t y, the country held its first democra t i c p erformance, and corporate social responsib i lity elections for 40 years and Joseph Kabila was that not only meet specific needs today, but that elected President in November. also reflect the capability of companies and organizations that are much larger and more In early 2003, when negotiations to create the mature. Kamoto joint venture began as a result of a new mining code, a workable and financeable This approach is essential in attracting outcome seemed far off. Now, because of the quality of employee we need and want. quite amazing transformations - including a I think it will also produce the capabilities constitution adopted by national r e f e r e n d u m ; needed to deliver performance on the many a popularly elected government; good wo r k fronts that ultimately produce the positive by the World Bank, the UN, and others; and outcomes we, as shareholders and stake- a revived demand for commodities - capital holders, all expect. in many forms is moving to the DRC. I feel it is extremely important that our Board I am optimistic this positive trend will reflects the country in wh i ch we opera t e . continue. The country once had a ve r y C o n s e q u e n t l y, we made significant changes in v i b rant economy and the revival of the 2006, increasing the number of representative s mining sector has an important role to play from the country to half of the eight-member in ensuring living conditions improve for Board. I believe the Board now provides a so many of the country’s people. clear voice of the Congolese people that filters through to our management approach . We can already see the effect of the joint ve n t u r e ’s presence in Kolwezi, as local availability of supplies and services improves Reserves provide a strong foundation because of the substantial payroll we p r ovide. Tax remittances to the national The foundation of any mining enterprise is government for duties and payroll taxes are the scale and quality or grade of its reserves n ow a steady stream that will play an and resources. Katanga Mining Limited is a important role in helping to improve the standout in this respect. Not only are its country’s infrastructure. attributable reserves very large, but they are of outstanding grade and uniformity, which Katanga Mining Limited also wants to play a facilitates efficient and cost effective mining. more direct role in helping the communities in and around our operations develop their The reserves and resources of the joint social infrastructure. Our approach will be to venture as of December 31, 2006 are 5.67 h ave a clear focus on strategically high million tonnes of copper and 614,000 tonnes impact, self sustaining projects that enable of cobalt and an average grade of 3.50 per the community to help itself. K A T A N G A M I N I N G L I M I T E D 3 “The past year was one of major accomplishments and all of us can be very proud of what we achieved.” cent copper and 0.38 per cent cobalt. We Opportunity and challenge in 2007 believe these inventories are sustainable and that they will increase over time. The past year was one of major accomplishments and all of us can be very proud of what we achieved. The impressive initiative of our Ambitious goals for 2007 advisors was crucial to an early start, and we are thankful for their support along with that This year we transform Katanga from a of our shareholders, who continue to grow in d e velopment company to a producer. From this number. overriding objective, come our goals for 2007: • Execute on-time and on-budget phase As the year progressed, we were fortunate to one of the capital program that will see be able to attract many talented people to us produce refined copper by year end the Company, from directors to entry level personnel.