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Sector: General Mining
EPIC: FQM
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First Quantum Minerals
www.first-quantum.com

First Quantum Minerals is a growing mining and metals company whose principal activities include mineral exploration, development and mining. The Company produces LME grade "A" copper cathode, copper in concentrate, gold and sulphuric acid.

First Quantum Minerals suspends Kolwezi Tailings Copper Mine Development

18th Sep 2009, 3:18 pm
First Quantum Minerals suspends Kolwezi Tailings Copper Mine Development

(Barry Seargent, Mineweb.com) African copper-gold miner First Quantum on Wednesday announced suspension of the build of the Kolwezi tailings copper mine in the Democratic Republic of the Congo, following actions taken by authorities characterised by First Quantum as "illegal".

Heat around the US$593m mine, 65% owned by First Quantum, and currently described as 65% complete, started rising many months ago in the bent crucible of the so-called mining contracts "revisitation" review process initiated by the DRC.

The review of most contracts has been concluded, barring that for Kolwezi tailings, and also over the biggest copper mine in the DRC, Tenke Fungurume, where Freeport-McMoRan operates and holds 58.8%; Lundin holds 24.8% and DRC parastatal Gécamines (La Générale des Carrières et des Mines) the balance of 17.5%. The first phase at the mine cost US$1.8bn to build, and produced its first copper cathode earlier this year.

As for the Kolwezi tailings project, a syndicate of commercial and development banks were mandated in early 2008 to provide a US$450m facility for the US$593m project. Earlier this year, such banks reaffirmed, according to First Quantum, "that, subject to a satisfactory outcome to the revisitation process being conducted in the DRC, they are prepared to provide the financing subject to completion of documentation and standard conditions precedent for a facility of this nature".

The project debt, when available, would be used to repay the funding provided by First Quantum to date. First Quantum reduced cash outflow to the project during the first quarter, pushing out commissioning to the second quarter of 2010. First Quantum raised US$500m in fresh equity on 28 May this year, following an earlier capital call in April when it completed an equity issue of 9.3m new shares, raising CA$346m. The group's cash flows were impacted by lower copper prices, and its capital expenditure demands at various existing and new projects. First Quantum renewed a US$250m corporate revolving loan in January this year.

Where First Quantum holds 65% of Kolwezi, Gécamines holds 12.5%, the Industrial Development Corporation (IDC) of South Africa 10%, the International Finance Corporation (IFC) 7.5%, and the government of the DRC, 5%. When commitments were made in November 2007 to proceed with the development of the Kolwezi tailings project, First Quantum, the IDC and IFC were left alone to raise finance or procure third party debt project financing for Kolwezi.

First Quantum owns and operates 80% of the Kansanshi copper-gold mine in Zambia ("a foundation asset"), 95% of Frontier in the DRC, the group's newest mine, 80% of the Guelb Moghrein gold-copper mine in Mauritania, 65% of the developing Kolwezi copper-cobalt project in the DRC, and, among other interests, exploration assets, including the Kevitsa copper-nickel-cobalt-gold-platinum-palladium project in Finland.

Concerns remain over Tenke and the position of Freeport-McMoRan, the world's biggest listed copper producer, biggest molybdenum miner, and a leading gold digger. In April, it was no secret that the Tenke Fungurume copper cobalt mine had been threatened with a shut down in six month's time. Whether this was true or not, the atmosphere remains dark and cold.

More than a few fingers have been pointed at Gécamines mandarin Paul Fortin, who is openly accused of holding a xenophobic position. It is open knowledge that Freeport-McMoRan negotiated every detail of the Tenke Fungurume agreement over several years, with Gécamines. The negotiations took place after the latest Congo war; indeed, the final documents have the authority of being formalised under a democratically elected government environment.

First Quantum summed up its official viewpoint today: "The company and the Kolwezi Project's other contributing partners, the IFC and the IDC, remain firmly of the view that the DRC government's actions have no legal basis. While the company is preparing to file for International Arbitration pursuant to the contract of association, it will continue to seek an alternative solution to the claims, which have resulted from the mining contract revisitation process, and will provide further updates as warranted".

First Quantum "regrets that the suspension will result in the immediate loss of approximately 700 jobs in the Kolwezi area, loss of tax revenues to the DRC government, and an indefinite delay in commissioning of the Kolwezi Project, which was targeted for May 2010". 

 

Selected DRC/Zambia copper-cobalt stocks

 

Stock

From

From

Value

 

price

high*

low*

USD bn

First Quantum

CAD 70.21

-8.9%

450.7%

5.147

Katanga Mining**

CAD 0.90

-85.1%

414.3%

1.596

Equinox

CAD 3.18

-3.6%

318.4%

2.080

Camec

GBP 0.20

-9.3%

926.3%

0.924

Metorex

ZAR 3.35

-77.5%

191.3%

0.339

Anvil**

CAD 2.95

-52.0%

555.6%

0.281

Mwana Africa

GBP 0.11

-59.1%

350.0%

0.074

Tiger Resources

AUD 0.18

-30.0%

150.0%

0.054

African Copper

GBP 0.08

-49.2%

1025.0%

0.107

Africo**

CAD 0.76

-42.9%

90.0%

0.052

Caledonia

CAD 0.07

-46.2%

180.0%

0.033

Int'l Barytex

CAD 0.10

-87.8%

150.0%

0.005

African Eagle

GBP 0.05

-61.0%

333.3%

0.024

Simberi**

CAD 0.01

-60.0%

100.0%

0.002

El Nino Ventures

CAD 0.06

-75.0%

57.1%

0.002

Averages/total

 

-49.8%

352.8%

10.720

Weighted averages

 

-75.5%

140.6%

 

Gold stocks

 

 

 

 

Banro**

CAD 2.55

-34.6%

218.8%

0.253

Moto Goldmines**

CAD 5.59

-1.9%

747.0%

0.578

AngloGold Ashanti

USD 45.00

-1.1%

236.6%

16.288

Mwana Africa

GBP 0.11

-59.1%

350.0%

0.074

Diversified

 

 

 

 

OM Group

USD 28.43

-21.0%

133.0%

0.873

Freeport-McMoRan

USD 72.39

-6.4%

361.1%

29.810

Vedanta

GBP 20.06

-0.3%

459.2%

9.036

Lundin

CAD 4.12

-0.7%

497.1%

2.233

* 12-month ** DRC only

 

 

 

Source: market data; table compiled by Barry Sergeant

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